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Exchange Rate Volatility and Corporate Financial Stability in Eurozone vs. Non-Eurozone Firms

Author

Listed:
  • Yetunde Bernice Oyewole

    (Department of Business Administration, Faculty of Management Science, Federal University Oye-Ekiti, Oye 371104, Nigeria)

  • Grace Oluyemisi Akinola

    (Department of Business Administration, Faculty of Administration, Obafemi Awolowo University, Ile-Ife 220005, Nigeria)

  • Odunayo M. Olarewaju

    (Department of Accounting, Metro State University, Saint Paul, MN 55106, USA)

  • Mustapha Bojuwon

    (Department of Accounting, Faculty of Management Science, Federal University Oye-Ekiti, Oye 371104, Nigeria)

  • Victoria Temitope Ikulagba

    (Department of Business and Management, University of Sunderland, London Campus, London E14 9GE, UK)

Abstract

The objective of this study was to explore the impact of exchange rate volatility on corporate financial stability in European corporations, with particular emphasis on the Eurozone and non-Eurozone. The data set of this study consisted of 80 publicly listed non-financial corporations in eight European countries over the period of 2010–2024. The model was able to capture the impact of various macroeconomic changes that affected European corporations in the past few years. The macroeconomic changes that were captured in this study were the European sovereign debt crisis, the COVID-19 pandemic in the world, and the conflict in Ukraine. The financial stability was measured by the Altman Z-score, the leverage ratio, and the current ratio. In this study, the financial impact of the exchange rate was measured by the rolling standard deviations and the conditional volatility with the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models. The fixed effects model estimation with the System Generalized Method of Moments (GMM) was used in this study. The results of this study showed that the exchange rate volatility was negatively correlated with financial stability in terms of the leverage ratio. However, the Eurozone provides protection against the financial impact of the exchange rate volatility in terms of the leverage ratio. The diagnostic tests in this study were carried out with the Hansen Test and the Arellano-Bond Test. The diagnostic tests confirmed that the results were valid. The significance of this study was that it provided longitudinal data on the impact of the exchange rate on the financial stability of European corporations with particular emphasis on the Eurozone and non-Eurozone. The study also provided new insights on the exchange rate in corporate finance. The Eurozone provides protection against the financial impact of the exchange rate.

Suggested Citation

  • Yetunde Bernice Oyewole & Grace Oluyemisi Akinola & Odunayo M. Olarewaju & Mustapha Bojuwon & Victoria Temitope Ikulagba, 2026. "Exchange Rate Volatility and Corporate Financial Stability in Eurozone vs. Non-Eurozone Firms," JRFM, MDPI, vol. 19(5), pages 1-34, May.
    • Handle: RePEc:gam:jjrfmx:v:19:y:2026:i:5:p:352-:d:1939972
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    References listed on IDEAS

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