Linear and Nonlinear Foreign Exchange Rate Exposures of German Nonfinancial Corporations

Finance from University Library of Munich, Germany

Abstract: 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.

Keywords: foreign exchange rates; exposure; corporate finance; risk management; derivatives (search for similar items in EconPapers)
JEL-codes: F3 F4 G3 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2002-07-02
New Economics Papers: this item is included in nep-fin and nep-ifn
Note: Type of Document - PDF; prepared on PC; pages: 41 ; figures: included
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Linear and nonlinear foreign exchange rate exposures of German nonfinancial corporations (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0207001

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