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Corporate Financial Policies and Performance around Currency Crises

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  • Arturo Bris

    (Yale School of Management and ECGI)

  • Yrj� Koskinen

    (Boston University School of Management and CEPR)

  • Vicente Pons

    (Yale School of Management)

Abstract

This paper studies firm-level leverage and performance measures before and after a currency crisis, using data from 17 countries. We show that, prior to a crisis, companies that expect to benefit from currency depreciations increase their leverage more than companies that are expected to be harmed by the depreciation. Profitability and financial fragility ratios display consistent patterns. We provide evidence that the Asian crisis is different from the previous European and Latin American ones: In Asia, all firms become more fragile after the crisis and their profitability declines and leverage increases further, whereas elsewhere there are clear signs of recovery after a crisis occurs.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 77 (2004)
Issue (Month): 4 (October)
Pages: 749-796

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Handle: RePEc:ucp:jnlbus:v:77:y:2004:i:4:p:749-796

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References

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  1. Arturo Bris & Yrjo Koskinen, 2000. "Corporate Leverage And Currency Crises," Yale School of Management Working Papers, Yale School of Management ysm139, Yale School of Management, revised 01 Oct 2008.
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Cited by:
  1. Goh, Ai-Ting & Olivier, Jacques, 2004. "Financing decisions of firms and central bank policy," Journal of International Money and Finance, Elsevier, Elsevier, vol. 23(7-8), pages 1187-1207.
  2. Joliet, Robert & Muller, Aline, 2013. "Capital structure effects of international expansion," Journal of Multinational Financial Management, Elsevier, Elsevier, vol. 23(5), pages 375-393.
  3. Timothy Chue & David Cook, 2004. "Sudden Stops and Liability Dollarization: Evidence from East Asian Financial Intermediaries," Econometric Society 2004 Far Eastern Meetings, Econometric Society 646, Econometric Society.
  4. Shafik Hebous & Alfons Weichenrieder, 2009. "Debt Financing and Sharp Currency Depreciations: Wholly vs. Partially Owned Multinational Affiliates," CESifo Working Paper Series 2892, CESifo Group Munich.
  5. Entorf & Jamin, 2005. "German Exchange Rate Exposure at DAX and Aggregate Level, International Trade, and the Role of Exchange Rate Adjustment Costs," International Finance, EconWPA 0508005, EconWPA.
  6. Júnior, José L. R., 2008. "Exchange Rate Exposure, Foreign Currency Debt and the Use of Derivatives: Evidence from Brazil," Insper Working Papers, Insper Working Paper, Insper Instituto de Ensino e Pesquisa wpe_141, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  7. Jose Luiz Rossi Junior, 2004. "Foreign Exchange exposure, corporate financial policies and the exchange rate regime: Evidence from Brazil," Econometric Society 2004 Latin American Meetings, Econometric Society 163, Econometric Society.
  8. Prasetyantoko, Agustinus, 2008. "Financing Policies and Firm Vulnerability in Indonesia," MPRA Paper 6533, University Library of Munich, Germany.
  9. Chue, Timothy K. & Cook, David, 2008. "Sudden stops and liability dollarization: Evidence from Asia's financial intermediaries," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 16(4), pages 436-452, September.
  10. Shafik Hebous & Alfons Weichenrieder, 2010. "Debt financing and sharp currency depreciations: wholly versus partially-owned multinational affiliates," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 146(2), pages 281-302, June.
  11. Naiwei Chen & Meiya Chang, 2013. "Financial Crisis and Corporate Liquidity: Implications for Emerging Markets," Asia-Pacific Financial Markets, Springer, Springer, vol. 20(1), pages 1-30, March.

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