A revisit to economic exposure of U.S. multinational corporations

De Wai Chou, Lin Lin, Pi Hsia Hung, Chun Heng Lin

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

To shed light on the influence of U.S. major trade partners’ currencies on MNCs’ firm values, this study investigates the asymmetric effects and the determinants of appreciated and depreciated economic exposure of the U.S. MNCs. Our empirical results reveal several findings: (1) The influences of exchange rate fluctuation on stock returns vary enormously for different currencies. (2) During the U.S. dollar appreciating period, MNCs benefit very little from this appreciation against major trade partners’ currencies, but most MNCs see harmful impacts from a U.S. dollar appreciation against the Brazilian real. (3) During the U.S. dollar depreciating period, most U.S. MNCs benefit from this depreciation against the European Monetary Union's euro, Mexican new peso and Brazilian real; however, they overall suffer losses against the Chinese yuan, Japanese yen, and British pound. (4) The level of foreign sales is the key determinant of economic exposure.

Original languageEnglish
Pages (from-to)273-287
Number of pages15
JournalNorth American Journal of Economics and Finance
Volume39
DOIs
Publication statusPublished - 2017 Jan 1

Keywords

  • Exchange exposure
  • Foreign exchange risk
  • GARCH
  • Multinationals

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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