Advanced Search
MyIDEAS: Login to save this article or follow this journal

The Relation between Exchange Rate Volatility and Firm Valuation: Polynomial Distributed Lag Model

Contents:

Author Info

  • Luke Lin

    (Department of Finance, National Kaohsiung First University of Science and Technology, Taiwan)

  • Chau-Jung Kuo

    (Department of Finance, National Sun Yat-sen University, Taiwan)

Registered author(s):

    Abstract

    This paper studies the sensitivity of cash flows generated by Taiwanese firms to changes in a trade-weighted index, as well as against the currencies of Taiwan's major trading partners. A traditional methodology, the capital market approach, typically found low or negligible levels of exposure for most firms. Moreover, this approach could not determine long-term exchange risks. We adopt the polynomial distributed lag model to examine the relative importance of economic versus transaction exposure by decomposing exposure into short-term and long-term components. Comparing this with the capital market approach, we find some evidence of the relative ability of cash flows to detect exposure. Our findings indicate that exporting firms show less significant net exposures to the U.S. dollar than to the Korean Won, and that importing firms show less significant net exposures to the Japanese Yen than to the Hong Kong dollar.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.jem.org.tw/content/pdf/Vol.4No.2/02.pdf
    Download Restriction: no

    File URL: http://www.jem.org.tw/content/abstract/Vol.4No.2/English/02.htm
    Download Restriction: no

    Bibliographic Info

    Article provided by College of Business, Feng Chia University, Taiwan in its journal Journal of Economics and Management.

    Volume (Year): 4 (2008)
    Issue (Month): 2 (July)
    Pages: 145-162

    as in new window
    Handle: RePEc:jec:journl:v:4:y:2008:i:2:p:145-162

    Contact details of provider:
    Postal: 100 Wenhwa Road, Seatwen, Taichung
    Web page: http://www.jem.org.tw/
    More information through EDIRC

    Related research

    Keywords: multinational corporations; exchange rate risk; cash flows;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:jec:journl:v:4:y:2008:i:2:p:145-162. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yi-Ju Su).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.