본문 바로가기 주메뉴 바로가기
kiep logo

Contents

Citation

Citation
No Title

Abstract

The purpose of this study is to examine the relationship between the movements of exchange rate and value of Korean firms, so-called foreign exchange rate exposure using newly devised model to find the strong evidence. I use weekly data on Korean Firms that are listed on Korea Stock Exchange (KSE) for the period from January 1997 to December 2000. I find that about 70% Korean Firms are actually exposed to Won-dollar exchange rate movement at 10% significance level and these results are substantially different from the previous empirical study where little statistical significance was found. In comparing the foreign exchange exposures with three different exchange rates, in Won-dollar and Won-yen exchange exposures, value of Korean firms is positively related to depreciation of Korean Won and negatively related to depreciation of Korean Won with Won-euro exchange exposure. With magnitude of three exposures, results can be interpreted that Dollar exposure seems to be the most significant among three foreign exchange exposures and Korean Firms' value is more sensitive to Won-dollar exchange rate. I also find that exchange exposure is strongly related to firm size and industry especially Electricity & Gas industry is most significantly related.

JEL classification: F31, F23, H32

Keywords

Foreign Exchange Exposure, Firm Size Exposure and Industry-Specific Exposure

Language

English

References

  1. Amihud, Y. 1994. "Evidence on exchange rates and valuation of equity shares," In Y. Amihud and R. Levich, Irwin ed., Exchange Rates and Corporate Performance. New York: Professional Publishing.
  2. Antti, Hakkarainen., Nathan, Joseph., Eero, Kasanen and Puttonen Vesa. 1998. "The Foreign Exchange Exposure Management Practices of Finnish Industrial Firms," Journal of International Financial Management and Accounting, vol. 9, no. 1, pp. 34-57. CrossRef
  3. Bodnar, G., Dumas, B. and R. Marston. 1999. "Pass-Through and Exposure," Mimeo, July.
  4. Bodnar, G. and R. Marston. 2000. "A Simple Model of Foreign Exchange Exposure," Mimeo. October 30.
  5. Bodnar, G. and F. Wong. "Estimating Exchange Rate Exposures: some 'WEIGHTY' Issues," NBER Working Paper no. 7497, January.
  6. Campa, J. and L. Goldberg. 1999. "Investment, Pass-through and Exchange Rates: A Cross-Country Comparison," International Economic Review, vol. 40, no. 2, pp. 287-314, May. CrossRef
  7. Chow, E., Lee, W. and M. Solt. 1997. "The Exchange Rate Exposure of Asset Returns," Journal of Business, vol. 70, no. 1, pp. 105-123. CrossRef
  8. Chow, E., Lee, W. and M. Solt. 1997. "The economic exposure of U.S. multinational firms," The Journal of Financial Research, vol. 20, no. 2, pp. 191-210.
  9. Chung, Chang-Young. 1997. Foreign Exchange Exposure of Korean Manufacturing Firms.
  10. Dominguez, Kathryn and Linda Tesar. 2001. "Exchange Rate Exposure," NBER Working Paper no. 8453, September.
  11. Dominguez, Kathryn and Linda Tesar. 2001. "Trade and Exposure," NBER Working Paper no. 8129, February.
  12. Dominguez, Kathryn. 1997. "The Dollar Exposure of Japanese Companies," Research Seminar in International Economics Discussion Paper no. 414, November, Revised October 1998.
  13. Dominguez, Kathryn and Linda Tesar. 2001. "A Re-examination of Exchange Rate Exposure," NBER Working Paper no. 8128, February.
  14. Friberg, Richard. 1997. "Openness and the Exchange Rate Exposure of National Stock Markets-a Note," Working Paper Series in Economics and Finance no. 195, September.
  15. Glaum, Martin., Brunner, Marko and Holger Himmel. 2000. "The DAX and the dollar, the Economic Exchange Rate Exposure of German Corporations," Journal of International Business Studies, vol. 31, no. 4 pp. 715-724 CrossRef
  16. Ihrig, Jane. 2001. "Exchange Rate Exposure of Multinationals: Focusing on Exchange Rate Issues," International Finance Discussion Papers no. 709, Board of Governors of the Federal Reserve System, August.
  17. Jorion, Philippe. 1990. "The Exchange-rate Exposure of U.S. Multinationals," Journal of Business, vol. 63, no. 3, pp. 331-345. CrossRef
  18. Jorion, Philippe. 1991. "The Pricing of Exchange Rate Risk in the Stock Market," Journal of Financial And Quantitative Analysis, vol. 26, no. 3, pp. 363-376, September. CrossRef
  19. Miller. Kent D. and Jeffrey J. Reuer. 1998. "Firm Strategy and Economic Exposure to Foreign Exchange Rate Movements," Journal of International Business Studies, vol. 29, no. 3 pp. 493-513. CrossRef
  20. Lee, Byung-Joo. 2001. "Exchange Rate Elasticity of Korean Companies: Pre- and Post-Economic Crisis Analysis," JEL Classification Number: F31, G10, C20.
  21. Lee, Wayne Y., Chow, Edward H. and Michael E. Solt. 1997. "The Exchange Rate Risk Exposure of Asset Returns," Journal of Business, vol. 70, no. 1, pp. 105-123.
  22. Fiess, Norbert and Fonald MacDonald. 1999. "Technical Analysis in the Foreign Exchange Market, A Cointegration-Based Approach," Multinational Finance Journal, Vol. 3, no. 3, pp. 147-172.
  23. Richard, C. Marston. 1996. "The Effects of Industry Structure on Economic Exposure," Working Paper no. 5518, March.
  24. Stefan, Nydahl. 1999. "Exchange Rate Exposure, Foreign involvement and Currency Hedging of Firms: some Swedish evidence," European Financial Management, vol. 5, no. 2, pp. 241-257. CrossRef