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The effects of fair value reporting on corporate foreign exchange exposures

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  • Krapl, Alain
  • Salyer, Robert

Abstract

We analyze the effects of fair value reporting standards (FVR) SFAS 133 and IAS 39 on foreign exchange (FX) exposures of U.S. multinational firms. We observe reductions in FX exposures to developed market currencies that coincide with the implementation of FVR. Risk reductions mainly affect U.S. multinational firms and to a much lesser extent matched control groups of domestic firms. For firms with exposures to emerging market currencies, we observe no changes in positive FX exposures but substantial shifts in negative exposures resulting in a change of exposure direction. Additionally we report changes in FX exposure asymmetry affecting multinational and domestic firms. Observed results are robust to several alternative model specifications and are unlikely explained by the launch of the euro, changes in firm-level FX exposure determinants, the rise and decline of technology shocks, shifts in systematic risk factors, or the Asian Financial Crisis.

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  • Krapl, Alain & Salyer, Robert, 2017. "The effects of fair value reporting on corporate foreign exchange exposures," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 215-238.
    • Handle: RePEc:eee:riibaf:v:39:y:2017:i:pa:p:215-238
    DOI: 10.1016/j.ribaf.2016.07.037
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    More about this item

    Keywords

    Fair value reporting; SFAS 133; IAS 39; Foreign exchange exposure; Asymmetric foreign exchange exposure;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F39 - International Economics - - International Finance - - - Other
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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