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Firm‐Level Competition and Exchange Rate Exposure: Evidence from a Global Survey of Firms
Author(s) -
Bergbrant Mikael C.,
Campbell Kaysia,
Hunter Delroy M.
Publication year - 2014
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12051
Subject(s) - competition (biology) , exchange rate , monetary economics , business , survey data collection , product market , product (mathematics) , industrial organization , economics , international economics , microeconomics , ecology , statistics , geometry , mathematics , biology , incentive
We examine the effect of competition on exchange rate exposure using survey data from 55 countries. We find that exposure increases with the intensity of competition. Exposure is higher when firms face price competition in international and domestic product markets and when rivals compete using an unfair financial advantage. Furthermore, competition is a leading determinant of exposure, dominating the usual determinants. Exposure also increases with several determinants not previously empirically examined, such as firm‐level financial constraints. These results hold for small, large, foreign‐involved, and purely domestic firms. Finally, import‐only firms have higher exposure than export‐only firms. Our survey results are likely to capture exposure before firms’ hedging actions.