مواجهه نرخ ارز خارجی خطی و غیر خطی در شرکت های غیرمالی آلمان

This paper investigates whether the low significance of the impact of foreign exchange rate risk on firm value reported in 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.

The foreign exchange rate exposure of nonfinancial firms is a contentious issue. Financial theory predicts an impact of foreign exchange rate risk on firm value due to corporate foreign currency cash flows originating, for example, from export and import transactions, foreign debt, cash flows of foreign subsidiaries and foreign portfolio investments. Moreover, more complicated exposures may result from the effect unexpected foreign exchange rate changes have on sales prices and quantities, production costs, market share and, thus, the competitive position of a firm (e.g. Levi, 1994). Contrary to expectations, a significant impact of foreign exchange rate risk on firm value can be found for only a small number of corporations (e.g. Bartov and Bodnar, 1994, Chow et al., 1997, Griffin and Stulz, 2001, He and Ng, 1998 and Jorion, 1990), a finding which has been perceived as the “exposure puzzle.” While many studies look at the exposure of U.S. corporations, firms in other countries (e.g. Japan, Europe, Australia) have become subject to investigation more recently. This paper presents a comprehensive study of the foreign exchange rate exposure of a large sample of German nonfinancial corporations. While German firms have not been subject to a broad empirical analysis, they lend themselves particularly well to the study of the exposure phenomenon since Germany is a very open economy that depends more than other countries, including the United States and Japan, on international business (as measured by exports or imports relative to Gross Domestic Product (GDP)). Several potential explanations exist for the low significance of the results of previous studies. Most importantly, existing studies investigate almost exclusively linear foreign exchange rate exposures. While the assessment of linear exposures has been motivated for hedging with forwards and futures, i.e. instruments with a linear payoff structure (Adler and Dumas, 1984), there exist also risk management instruments with nonlinear payoff profiles, such as options or portfolios of options. Since financial theory predicts that the exposure of firms may have a nonlinear component due to nonlinear relationships between corporate cash flows and exchange rates (e.g. Giddy and Dufey, 1995, Sercu and Uppal, 1995, Stulz, 2003, Kanas, 1996a, Kanas, 1996b and Ware and Winter, 1988), the assessment of nonlinear exposures has important implications for corporate risk management. Another reason for insignificant foreign exchange rate exposures might exist in the use of foreign exchange rate indices for exposure estimation because the weighting of different foreign exchange rates in the indices is not representative for the individual firm. Additionally, the aggregation of several currencies may lead to diversification effects, which reduce the statistical significance of the exposures since changes in individual currencies may partially offset each other. Motivated by these potential shortcomings in the empirical exposure literature, this paper offers a re-investigation of the foreign exchange rate exposure phenomenon using a new data set and improved methodologies. The study analyzes the exposure of 447 publicly traded nonfinancial corporations in Germany during the period 1981–95. The results show some significance for linear exposures of German corporations with regard to the currencies of Germany’s most important trading partners. In addition, nonlinear exposures are substantially more statistically significant for all foreign exchange rates. These results persist even when excluding the largest exchange rate movements. Sign/size bias tests and partially nonparametric regressions yield supporting evidence to corroborate the nonlinear feature of the exposure. Interestingly, multilateral foreign exchange rates do not cause excessive diversification effects precluding the identification of significant exposures for German firms. The ratio of foreign sales to total sales, firm liquidity and industry sectors constitute empirically significant determinants of the foreign exchange rate exposure. The paper is organized as follows. Section 2 presents a review of the relevant literature. The hypotheses and regression models are introduced in Section 3, while the data set is described in Section 4. Section 5 presents the empirical results, and Section 6 concludes.

The results presented in this paper originate from a comprehensive study of the foreign exchange rate exposure of 447 German nonfinancial corporations during the period of 1981–95. Due to the international dependence of its economy, Germany is extremely well suited as the subject for this kind of study. Indeed, many German firms exhibit a significant exposure for different foreign exchange rate indices as well as for the bilateral foreign exchange rates of Germany’s most important trading partners. In addition to linear foreign exchange rate exposures, a significant nonlinear exposure component can be identified for all different foreign exchange rates and periods. Nonlinearities in the exposure may originate from corporate cash flows that are a nonlinear function of the exchange rate. Consequently, the assumption of a uniform, symmetric and linear exposure that is implicit in the classical approach for exposure estimation appears to be unrealistic and simplifying. Nonlinear regression specifications, sign and size bias tests, as well as partially nonparametric regressions reveal some empirical evidence in support of a nonlinear characteristic of the foreign exchange rate exposure. The empirical evidence does not indicate that the economic foreign exchange rate exposure is primarily driven by the currency of determination. In line with previous studies, the ratio of foreign sales to total sales is identified as an important explanatory variable for foreign exchange rate exposures. Thus, firms with more international sales exhibit systematically larger and more significant foreign exchange rate exposures. In addition, firm liquidity variables, especially cash flow/total assets, are significantly negatively related to the exposure. Moreover, industry sectors are important determinants of the foreign exchange rate exposure. The results of this study motivate important implications for corporate risk management. Given that a simple linear relationship between financial risks and firm value cannot be assumed in general, the structure of the economic exposure has to be taken into account for exposure estimation. Only when considering potential nonlinear exposure components, can corporate financial exposures be estimated and hedged properly. As the choice of hedging tools is determined by the exposure profile, nonlinear foreign exchange rate exposures suggest the use of hedging instruments with nonlinear payoff profiles such as financial and/or real options.