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The Euro and Corporate Valuations

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Author Info
Arturo Bris
Yrjö Koskinen
Mattias Nilsson

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Abstract

In this paper, we study the changes in corporate valuations induced by the adoption of the euro as the common currency in Europe. We use corporate-level data from seventeen European countries, of which eleven adopted the euro. We show that the introduction of the euro has increased Tobin's Q-ratios by 17.1% in the {euro-area} countries that previously had weak currencies. Part of the increase in corporate valuations is explained by the decrease in interest rates and by the decrease in the cost of equity. The increases in Tobin's Q are larger for firms that would be harmed by currency devaluations. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/rfs/hhn101
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Article provided by Oxford University Press for Society for Financial Studies in its journal The Review of Financial Studies.

Volume (Year): 22 (2009)
Issue (Month): 8 (August)
Pages: 3171-3209
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Handle: RePEc:oup:rfinst:v:22:y:2009:i:8:p:3171-3209

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  1. Philip R. Lane, 2008. "EMU and Financial Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp272, IIIS. [Downloadable!]
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