Foreign Exchange Exposure and Stock Returns: Evidence from Multinational Corporations in Taiwan

Zixiong Xie, Shyh-Wei Chen () and Jie-Hong Fang
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Zixiong Xie: Department of International Economics and Trade, Research Institute of Natural Resources, Environment & Sustainable Development, College of Economics, Jinan University, Guangzhou, China
Shyh-Wei Chen: Department of International Business, Center for Applied Economic Modeling, Chung Yuan Christian University, Taiwan
Jie-Hong Fang: Department of International Business, Chung Yuan Christian University, Taiwan

Journal of Economics and Management, 2014, vol. 10, issue 1, 49-68

Abstract: Using data for 541 Taiwanese listed companies over the 1994-2009 period, this paper examines the effect of unexpected exchange rate exposure on the value of the enterprise and the determinants of exchange rate exposure in Taiwan. The empirical evidence shows that about 25% of listed companies suffer exchange rate exposure risk and this condition becomes more severe when the economy contracts. We also investigate the determinants of exchange rate exposure. Two categorical variables are included: the first describes the firm's business operations and the second the firm's financial characteristics. The empirical evidence shows that the size of the company and book-to-market value has negative effects on the exchange rate exposure. Besides, we find that the quick ratio and age of firms have nonlinear U-shaped effects on exchange rate exposure.

Keywords: exchange rate exposure; the determinants of exchange rate exposure; panel data (search for similar items in EconPapers)
JEL-codes: C30 F23 F31 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:jec:journl:v:10:y:2014:i:1:p:49-68

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