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Estimating the Exchange Rate Exposure of US Multinational Firms: Evidence from an Event Study Methodology

In: Risk Management

Author

Listed:
  • Kathryn L. Dewenter
  • Robert C. Higgins
  • Timothy T. Simin

    (University of Washington)

Abstract

This paper provides new evidence on the issue of whether or not there is a contemporaneous relation between the dollar and firm value as measured with stock returns. Prior studies have failed to find any short-term relation between the value of the dollar and the stock price reactions of U.S. multinational firms. Using a different methodology than previous studies, we find a significant average negative drop in stock price across 430 firms on the day that Thailand devalued the bhat, initiating Asia’s financial crisis. We also show that this measure of exposure is related to both firm size and several proxies for intensity of foreign and Asian operations.

Suggested Citation

  • Kathryn L. Dewenter & Robert C. Higgins & Timothy T. Simin, 2005. "Estimating the Exchange Rate Exposure of US Multinational Firms: Evidence from an Event Study Methodology," Springer Books, in: Michael Frenkel & Markus Rudolf & Ulrich Hommel (ed.), Risk Management, edition 0, pages 557-569, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-26993-9_28
    DOI: 10.1007/3-540-26993-2_28
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    Keywords

    Exchange Rate Exposure;

    Statistics

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