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Asymmetric corporate exposures to foreign exchange rate changes
Author(s) -
Miller Kent D.,
Reuer Jeffrey J.
Publication year - 1998
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/(sici)1097-0266(1998120)19:12<1183::aid-smj1>3.0.co;2-s
Subject(s) - currency , depreciation (economics) , exchange rate , economics , monetary economics , foreign exchange risk , offset (computer science) , foreign exchange , foreign exchange market , business , microeconomics , profit (economics) , programming language , capital formation , financial capital , computer science
Research examining firms' economic exposures to exchange rate movements has not differentiated periods of foreign currency appreciation and depreciation when estimating exposure coefficients. Recent theoretical developments regarding real options and pricing‐to‐market suggest corporate exposures may be asymmetric (i.e., the financial performance impact of a foreign currency appreciation may not be offset by the currency's depreciation). Our empirical analysis indicates that for the small percentage of U.S. manufacturing firms exposed to currency appreciations or depreciations, their exposures are asymmetric. © 1998 John Wiley & Sons, Ltd.