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The effects of exchange rate movements on non-financial UK firms

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  • Bradley, Katrina
  • Moles, Peter

Abstract

This study examines the effects of direct and indirect economic currency exposure on a group of publicly-listed, non-financial UK firms. Information was obtained from the companies at two points in time, during a period of sterling depreciation and then one of appreciation, and the results compared. When sterling depreciated, firms experienced increased profit margins and/or sales volumes and increases in the cost of foreign-sourced inputs. The opposite conditions were reported for sterling appreciation. Our results show considerable stability in the estimates of economic exposure between the two periods. In managing currency effects, about 75 per cent of exporting firms adjusted either margins or volumes, or both, in response to changes in the exchange rate. As with other studies, we found a significant industry effect. Overall we find that the results confirm the impact of economic currency exposure but, at the same time, firms are less exposed to exchange rate movements than the theory would suggest.

Suggested Citation

  • Bradley, Katrina & Moles, Peter, 2001. "The effects of exchange rate movements on non-financial UK firms," International Business Review, Elsevier, vol. 10(1), pages 51-69, February.
    • Handle: RePEc:eee:iburev:v:10:y:2001:i:1:p:51-69
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    References listed on IDEAS

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    Cited by:

    1. Klimczak, Karol Marek, 2007. "Risk Management Theory: A comprehensive empirical assessment," MPRA Paper 4241, University Library of Munich, Germany.
    2. Mojisola Olugbode & Ahmed El-Masry & John Pointon, 2014. "Exchange Rate and Interest Rate Exposure of UK Industries Using First-order Autoregressive Exponential GARCH-in-mean (EGARCH-M) Approach," Manchester School, University of Manchester, vol. 82(4), pages 409-464, July.
    3. Ahmed A. El-Masry, 2004. "The Exchange Rate Exposure of UK Nonfinancial Companies: Industry-Level Analysis," International Finance 0401001, University Library of Munich, Germany.

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