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How Do Large Depreciations Affect Firm Performance?

  • Forbes, Kristin

This paper examines how 12 "major depreciations" between 1997 and 2000 affected different measures of firm performance in a sample of over 13,500 companies from around the world. Results suggest that in the year after depreciations, firms have significantly higher growth in market capitalization, but significantly lower growth in net income (when measured in local currency). Firms with a higher share of foreign sales exposure have significantly better performance after depreciations, according to a range of indicators. Firms with higher debt ratios tend to have lower net income growth, but there is no robust relationship between debt exposure and the other performance variables. Larger firms frequently have worse performance than smaller firms, although the significance and robustness of this result fluctuates across specifications

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File URL: http://hdl.handle.net/1721.1/1766
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Paper provided by Massachusetts Institute of Technology (MIT), Sloan School of Management in its series Working papers with number 4379-02.

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Date of creation: 23 Oct 2002
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Handle: RePEc:mit:sloanp:1766
Contact details of provider: Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
Phone: 617-253-2659
Web page: http://mitsloan.mit.edu/

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Order Information: Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA

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  1. Rupa Duttagupta & Antonio Spilimbergo, 2004. "What Happened to Asian Exports During the Crisis?," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 4.
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  9. Forbes, Kristin J., 2002. "Cheap labor meets costly capital: the impact of devaluations on commodity firms," Journal of Development Economics, Elsevier, vol. 69(2), pages 335-365, December.
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  12. Kristin Forbes, 2000. "The Asian Flu and Russian Virus: Firm-level Evidence on How Crises are Transmitted Internationally," NBER Working Papers 7807, National Bureau of Economic Research, Inc.
  13. Steven B. Kamin & Marc Klau, 1997. "Some multi-country evidence on the effects of real exchange rates on output," BIS Working Papers 48, Bank for International Settlements.
  14. Jorion, Philippe, 1990. "The Exchange-Rate Exposure of U.S. Multinationals," The Journal of Business, University of Chicago Press, vol. 63(3), pages 331-45, July.
  15. Marvin Barth & Trevor Dinmore, 1999. "Trade prices and volumes in East Asia through the crisis," International Finance Discussion Papers 643, Board of Governors of the Federal Reserve System (U.S.).
  16. Ratna Sahay & Deepak Mishra & Poonam Gupta, 2003. "Output Response to Currency Crises," IMF Working Papers 03/230, International Monetary Fund.
  17. George Allayannis & Jane Ihrig, 2000. "The effect of markups on the exchange rate exposure of stock returns," International Finance Discussion Papers 661, Board of Governors of the Federal Reserve System (U.S.).
  18. Dominguez, Kathryn M.E. & Tesar, Linda L., 2006. "Exchange rate exposure," Journal of International Economics, Elsevier, vol. 68(1), pages 188-218, January.
  19. Kamin, S.B., 1988. "Devaluation, External Balance, And Macroeconomic Performance: A Look At The Numbers," Princeton Studies in International Economics 62, International Economics Section, Departement of Economics Princeton University,.
  20. Matthew Higgins & Thomas Klitgaard, 2000. "Asia's trade performance after the currency crisis," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 37-49.
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