Does the Yuan’s Overseas Expansion Increase the Currency Exposure of Chinese Financial Firms?

Juan Cuestas, Ying Huang and Bo Tang

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates both the symmetric and asymmetric exchange rate exposures of Chinese financial firms in the context of an accelerated pace of RMB internationalisation. We find that an increasing number of Chinese financial firms are exposed to negative symmetric effects from the change in the trade weighted effective exchange rate. The evidence concerning asymmetries shows that after 2009 negative exchange rate shocks have a stronger effect on exposures than positive shocks. Changes in the bilateral exchange rate also have a significant impact on firm returns, given the importance of the USD in the effective exchange rate. Further, the empirical analysis reveals that exchange rate exposures are associated with firm level characteristics including total assets, earnings per share, net cash flows, investment incomes, total liabilities and firm size. Finally, we suggest that domestic and foreign stakeholders need to pay close attention to the movement of the Yuan’s exchange rate before it becomes completely convertible.

Keywords: exchange rate exposure; RMB internationalisation; Chinese financial firms. (search for similar items in EconPapers)
JEL-codes: C58 F3 F31 G1 G15 (search for similar items in EconPapers)
Date: 2016-04-18
New Economics Papers: this item is included in nep-ifn, nep-opm, nep-pke and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Does the Yuan's Overseas Expansion Increase the Currency Exposure of Chinese Financial Firms? (2016)
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