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Linear and Nonlinear Foreign Exchange Rate Exposures of German Nonfinancial Corporations

  • Sohnke M. Bartram

    (Lancaster University, Graduate School of Management)

It has been viewed as an unsolved puzzle that only for a small number of firms a significant impact of foreign exchange rate risk on firm value could be detected empirically. This paper investigates whether the results of previous studies can be explained by the fact that only the linear exposure component has been estimated or that exchange rate indices were used. For a comprehensive sample of German firms, empirical evidence is presented for the existence of significant linear and nonlinear exposures, which can be identified for bilateral as well as multilateral foreign exchange rates. The percentage of foreign sales, measures of firm liquidity and industry sectors are significant determinants of the exposure.

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File URL: http://econwpa.repec.org/eps/fin/papers/0207/0207001.pdf
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Paper provided by EconWPA in its series Finance with number 0207001.

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Length: 41 pages
Date of creation: 02 Jul 2002
Date of revision:
Handle: RePEc:wpa:wuwpfi:0207001
Note: Type of Document - PDF; prepared on PC; pages: 41 ; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Kathryn M.E Dominguez & Linda L. Tesar, 2000. "Trade and Exposure," Working Papers 466, Research Seminar in International Economics, University of Michigan.
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  9. Martin Glaum & Marko Brunner & Holger Himmel, 2000. "The DAX and the Dollar: The Economic Exchange Rate Exposure of German Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 31(4), pages 715-724, December.
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  13. Jongmoo Jay Choi & Anita Mehra Prasad, 1995. "Exchange Risk Sensitivity and Its Determinants: A Firm and Industry Analysis of U.S. Multinationals," Financial Management, Financial Management Association, vol. 24(3), Fall.
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  16. Williamson, Rohan, 2001. "Exchange rate exposure and competition: evidence from the automotive industry," Journal of Financial Economics, Elsevier, vol. 59(3), pages 441-475, March.
  17. Bartov, Eli & Bodnar, Gordon M, 1994. " Firm Valuation, Earnings Expectations, and the Exchange-Rate Exposure Effect," Journal of Finance, American Finance Association, vol. 49(5), pages 1755-85, December.
  18. Griffin, John M & Stulz, Rene M, 2001. "International Competition and Exchange Rate Shocks: A Cross-Country Industry Analysis of Stock Returns," Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 215-41.
  19. Allayannis, George & Ihrig, Jane, 2001. "Exposure and Markups," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 805-35.
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