Open AccessThe Foreign Exchange Exposures and Enterprise Risk Management: Evidence from Hospitality Industry in Taiwan
Author(s) -
Chiu Ming Hsiao
Publication year - 2017
Publication title -
asian journal of finance and accounting
Language(s) - English
Resource type - Journals
ISSN - 1946-052X
DOI - 10.5296/ajfa.v9i1.11077
Subject(s) - exchange rate , foreign exchange , foreign exchange risk , business , portfolio , risk management , interest rate parity , enterprise risk management , autoregressive integrated moving average , hospitality , financial economics , industrial organization , economics , monetary economics , finance , tourism , computer science , time series , law , political science , machine learning
This paper adopts ARIMA model to explore the relationship between business performance and the fluctuation of exchange rate. The empirical results show that the impacts of the fluctuation of foreign exchange rate on the business performance of hotels are significant and different across currencies and the size of a hotel. Furthermore, based on the framework of Kim (2013), a modern portfolio theory proposed by Markowitz (1952) gives an optimal allocation of foreign exchange for a hotel’s decision-makers, who would avoid exchange rate risk exposure and complete the construction of enterprise risk management system (ERM) to reduce losses.