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Firm-level exchange rate exposure in the Eurozone

  • Hutson, Elaine
  • O'Driscoll, Anthony

Using a sample of 1154 European firms from 11 countries, we show that firm-level exchange exposure for Eurozone and non-Eurozone European firms has increased since the introduction of the euro, but this rise was smaller for Eurozone than non-Eurozone firms. The increase in firm-specific exposure was offset by a substantial reduction in market-level exchange exposure in most Eurozone countries, so the advent of the euro appears to have been associated with a shift in exchange risk from systematic to firm-specific. We also find that post-euro, Eurozone firms' exchange exposure is significantly greater than that of non-Eurozone European firms. This difference, however, disappears after controlling for several country-specific and firm-specific characteristics that potentially influence firms' exchange exposure.

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Article provided by Elsevier in its journal International Business Review.

Volume (Year): 19 (2010)
Issue (Month): 5 (October)
Pages: 468-478

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Handle: RePEc:eee:iburev:v:19:y:2010:i:5:p:468-478
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