Abstract
We find that about 13% of our sample of 817 European multinational firms experienced economically significant exposure effects to the Japanese yen, 14% to the US dollar and 22% to the UK pound. Our evidence differs substantially from the US experience and is robust across sub-sample periods, suggesting that a depreciating (appreciating) euro against foreign currencies has a net negative (positive) impact on European stock returns. Short-term exposure seems to be relatively well hedged, where considerable evidence of long-term exposure is found. Firms with weak liquidity positions tend to have smaller exposures. Foreign exposure is found to increase with firm size.
Original language | English |
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Pages (from-to) | 195-220 |
Number of pages | 26 |
Journal | European Financial Management |
Volume | 12 |
Issue number | 2 |
DOIs | |
Publication status | Published - 2006 |
Externally published | Yes |
Keywords
- exchange risk
- European multinational firms
- hedging policies
- intervaling
- long-term exposure