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

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

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.

Suggested Citation

  • Chou, De-Wai & Lin, Lin & Hung, Pi-Hsia & Lin, Chun Heng, 2017. "A revisit to economic exposure of U.S. multinational corporations," The North American Journal of Economics and Finance, Elsevier, vol. 39(C), pages 273-287.
    • Handle: RePEc:eee:ecofin:v:39:y:2017:i:c:p:273-287
    DOI: 10.1016/j.najef.2016.10.011
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    3. Van Cauwenberge Annelies & Vancauteren Mark & Braekers Roel & Vandemaele Sigrid, 2022. "The degree of international trade and exchange rate exposure—Firm‐level evidence from two small open economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 3832-3850, October.

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    More about this item

    Keywords

    Exchange exposure; Foreign exchange risk; Multinationals; GARCH;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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