Exchange rate variability and the riskiness of US multinational firms: evidence from the Asian financial turmoil |
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| Institution: | 1. Xinhua Financial Network (Shanghai Office), Suite 2003-4, Vicwood Plaza, 199 Des Voeux Road Central, Central, Hong Kong;2. Department of Finance, Chinese University of Hong Kong, Shatin, N.T., Hong Kong;1. ICMA Centre, Henley Business School, University of Reading, Whiteknight Campus, Reading, UK;2. Robert Day School of Economics and Finance, Claremont McKenna College, 888N Columbia Avenue, Claremont, California, USA;3. College of Business, California State University, Long Beach, 1250 Bellflower Boulevard, Long Beach, CA, 90840, USA |
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| Abstract: | This paper studies the relationship between exchange rate variability and the volatility of the returns of US multinationals. Based on a sample of US multinationals with sales in the Asia-Pacific region, we examine how exchange rate fluctuations around the 1997 Asian financial crisis affected the sensitivity of those firms to stock market risk. The empirical evidence shows that increases in exchange rate variability during the crisis were associated with statistically significant increases in stock return volatility for the multinationals. Some of the increases in volatility were systematic in nature, because the beta coefficients of the firms rose during the period of increased exchange rate variability. |
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