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The Euro and Corporate Valuations

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  • Arturo Bris
  • Yrjö Koskinen
  • Mattias Nilsson

Abstract

In this paper, we study the changes in corporate valuations induced by the adoption of the euro as the common currency in Europe. We use corporate-level data from seventeen European countries, of which eleven adopted the euro. We show that the introduction of the euro has increased Tobin's Q-ratios by 17.1% in the {euro-area} countries that previously had weak currencies. Part of the increase in corporate valuations is explained by the decrease in interest rates and by the decrease in the cost of equity. The increases in Tobin's Q are larger for firms that would be harmed by currency devaluations. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press.

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  • Arturo Bris & Yrjö Koskinen & Mattias Nilsson, 2009. "The Euro and Corporate Valuations," The Review of Financial Studies, Society for Financial Studies, vol. 22(8), pages 3171-3209, August.
    • Handle: RePEc:oup:rfinst:v:22:y:2009:i:8:p:3171-3209
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    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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