Exchange rate exposure among European firms: evidence from France, Germany and the UK


  • We gratefully acknowledge Robert Faff, Darryl Holden, Jeroen Ligterink, Anthony Santomero, Piet Sercu, Richard Stapleton and an anonymous referee for their suggestions. Steven Tokar provided excellent research assistance on earlier drafts of the present paper.


We investigate the pre-Euro exposure to exchange rate changes of large firms in the UK, France and Germany. We find that the exchange rate sensitivity is considerably stronger than previously thought. In all three countries, firms typically gain value when their local currency depreciates against the US dollar, yet most UK firms lose value when sterling depreciates against the European currency unit. We also document the existence of an intriguing intervalling effect in the measurement of exchange rate exposure, which suggests that share prices might exhibit a delayed response to information, and prevents us from making robust generalizations concerning other exchange rate sensitivities.