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Asymmetric corporate exposures to foreign exchange rate changes

Article Abstract:

The asymmetric exposures of business organizations to foreign exchange rate appreciation and depreciation are investigated. The study focuses on the exposure patterns of American companies and to the consistency of these patterns with option theory and pricing-to-market behavior. Estimation of bivariate regression models reveals that only a small portion of US manufacturers were exposed to currency appreciations or depreciations. The findings also indicate that the economic exposures of manufacturing companies to foreign exchange rate fluctuations are seldom symmetric for currency appreciations and depreciations. No evidence was found supporting the argument that some firms have competencies and international investment configurations that enable them generate profit from currency changes.

Economic aspects, Prices and rates, International business enterprises, Multinational corporations, Foreign exchange, Foreign exchange rates

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Economic exposure and integrated risk management

Article Abstract:

Clear guidelines for the measurement of economic exposure hinders the performance of economic exposure assessment and hedging. A study addressing this shortcoming provides pointers for the development of estimable models of economic exposure that consider the choice of the dependent variable and regressors as well as the functional form of the relations. The multivariate models describe corporate risk exposures by combining the unique exposures of interest to finance, international business and strategy researchers. This analysis demonstrated the limitations of cashflow-oriented exposure assessments and stressed that shareholder returns are acceptable dependent variable. It also suggested that total variability of regressors should be included instead of the deviations from expectations.

Research, Risk (Economics), Risk management

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