 Diversification and firm risk: New evidence on exchange rate exposureTaek Ho Kwon, Sung C. Bae and Chenyang Liu Journal of International Financial Markets, Institutions and Money, 2025, vol. 101, issue C Abstract: This study examines the effect of industrial diversification on exchange rate exposure based on the resource-based and portfolio views of corporate diversification. Sampling Korean firms, we report new evidence that once the effect of geographic diversification is controlled and the self-selection bias is corrected, industrial diversification provides a strong positive effect in reducing exchange rate exposure. The mitigating effect of industrial diversification on FX exposure is more pronounced for geographically diversified firms which are in nature highly exposed to FX risk. Our results indicate that industrial diversification helps firms with international operations reduce their exchange rate exposure, supporting the complementary role of industrial diversification in managing FX risk associated with geographic diversification. Our study offers further discussions on potential mechanisms through which industrial and geographic diversification interacts in FX risk reduction. Keywords: Industrial diversification; Geographic diversification; Exchange rate exposure; Korean firms (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:101:y:2025:i:c:s1042443125000484 DOI: 10.1016/j.intfin.2025.102158 Access Statistics for this article Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely More articles in Journal of International Financial Markets, Institutions and Money from Elsevier |
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