Firm-level exchange exposure in the Eurozone

Elaine Hutson and Anthony O'Driscoll
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Anthony O'Driscoll: School of Business, University College Dublin

No 200841, Working Papers from Geary Institute, University College Dublin

Abstract: Using a sample of 1,154 European firms from 11 countries, we show that firm-level exchange exposure for Eurozone and non-Eurozone European firms has increased since the advent of the euro, but this rise was smaller for Eurozone than non-Eurozone firms. The increase in firmspecific risk is offset by a substantial reduction in market-level exchange exposure in most Eurozone countries, so the advent of the Eurozone appears to have been associated with a shift in exchange risk from systematic to firm-specific. We also find that Eurozone firms’ exchange exposure is greater than that of non-Eurozone European firms, and univariate testing confirms the significance of this difference. In a multivariate setting, however, after controlling for countryspecific and firm-specific characteristics that potentially influence the extent of exposure – economic openness, governance factors, firm size, industry and several financial ratios – this difference is no longer apparent.

Keywords: foreign exchange exposure; euro; Eurozone; economic openness (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010-04-13
New Economics Papers: this item is included in nep-bec, nep-eec, nep-eur and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:ucd:wpaper:200841

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