The authors would like to thank an anonymous referee, John Doukas (the Editor), participants at the Financial Management Association 2005 Annual Conference for helpful comments and suggestions. Jungwon Suh gratefully acknowledges financial support from the Ewha Womans University Grant 2007. The usual disclaimer applies.
Exchange Rate Changes and the Operating Performance of Multinationals
Article first published online: 18 NOV 2009
© 2010 Blackwell Publishing Ltd
European Financial Management
Volume 18, Issue 1, pages 88–116, January 2012
How to Cite
Lee, B.-S. and Suh, J. (2012), Exchange Rate Changes and the Operating Performance of Multinationals. European Financial Management, 18: 88–116. doi: 10.1111/j.1468-036X.2009.00522.x
- Issue published online: 18 NOV 2009
- Article first published online: 18 NOV 2009
- exchange rate exposure;
- operating performance;
- multinational companies
Using a sample of 261 US multinationals over the period 1984–2002, we examine the relation between exchange rate changes and the profitability of foreign operations. We find that the impact of exchange rate changes on foreign operations’ profitability is not statistically significant in the majority of industries. Furthermore, according to our variance components analysis, exchange rate changes explain less than 2% of the variation in foreign operations’ profitability for most industries. We also find that the impact of exchange rate changes on foreign operations’ profitability is generally weak for non-US multinationals from Australia, Canada, Japan and the UK. Our evidence is consistent with the finding of prior studies that the impact of exchange rate changes on firm value is not significant for most multinationals.