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Exchange Rate Changes and the Operating Performance of Multinationals

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  • Bong†Soo Lee
  • Jungwon Suh

Abstract

Using a sample of 261 US multinationals over the period 1984–2002, we examine the relation between exchange rate changes and the profitability of foreign operations. We find that the impact of exchange rate changes on foreign operations’ profitability is not statistically significant in the majority of industries. Furthermore, according to our variance components analysis, exchange rate changes explain less than 2% of the variation in foreign operations’ profitability for most industries. We also find that the impact of exchange rate changes on foreign operations’ profitability is generally weak for non†US multinationals from Australia, Canada, Japan and the UK. Our evidence is consistent with the finding of prior studies that the impact of exchange rate changes on firm value is not significant for most multinationals.

Suggested Citation

  • Bong†Soo Lee & Jungwon Suh, 2012. "Exchange Rate Changes and the Operating Performance of Multinationals," European Financial Management, European Financial Management Association, vol. 18(1), pages 88-116, January.
    • Handle: RePEc:bla:eufman:v:18:y:2012:i:1:p:88-116
    DOI: 10.1111/j.1468-036X.2009.00522.x
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    Cited by:

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    3. Park, Soon Hong & Suh, Jungwon & Yeung, Bernard, 2013. "Do multinational and domestic corporations differ in their leverage policies?," Journal of Corporate Finance, Elsevier, vol. 20(C), pages 115-139.

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