International evidence on the determinants of foreign exchange rate exposure of multinational corporations

Robert Faff and Andrew Marshall
Additional contact information
Andrew Marshall: Department of Accounting and Finance, University of Strathclyde, Glasgow, Scotland, UK

Journal of International Business Studies, 2005, vol. 36, issue 5, 539-558

Abstract: In this paper we explore some of the potential determinants of foreign exchange (FX) exposure and firm value. We contribute to previous research on stock returns and firm value as we have access to a unique survey database and can include as determinants in our empirical analysis the objectives and emphasis on risk management, as well as considering previous factors including the nature of the business environment. We can also examine any regional influences as our sample includes UK, US and Asia Pacific multinational companies (MNCs). As predicted by theory, we find some evidence that MNCs with greater foreign operations have a larger magnitude of FX exposure. However, our proxy for the emphasis of FX management does not have the predicted negative association with the magnitude of FX, indicating that managers may focus on short-term cash flows in their FX management rather than firm value. With regard to the potentially differential regional role of our variables, a range of interesting results is found. Arguably, in our most notable such finding, we see that the contribution of overseas business to total revenues has no association with the magnitude of FX exposure for US MNCs: it has a positive role for UK MNCs (consistent with theory) and a negative role for Asia Pacific MNCs, which could be explained by macroeconomic and/or financial characteristics of the MNCs in the sample. Journal of International Business Studies (2005), 36, 539–558. doi:10.1057/palgrave.jibs.8400155

Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.palgrave-journals.com/jibs/journal/v36/n5/pdf/8400155a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/jibs/journal/v36/n5/full/8400155a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jintbs:v:36:y:2005:i:5:p:539-558

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41267/PS2

Access Statistics for this article

Journal of International Business Studies is currently edited by John Cantwell

More articles in Journal of International Business Studies from Palgrave Macmillan, Academy of International Business
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().