سیاست های شرکت های بزرگ مالی و رژیم نرخ ارز: مدارک و شواهد از برزیل

This paper analyzes the relationship between companies' financial policies and the exchange rate regime for a sample of non-financial Brazilian companies from 1996 to 2006. The adoption of a floating exchange rate regime is shown to improve the match between the currency composition of companies' assets and liabilities. The paper also shows that this reduction in companies' currency mismatches is more pronounced for companies in the highest quantile of foreign exposure; therefore the results confirm that the exchange rate regime plays an important role in the determination of companies' foreign vulnerability.

Adverse external shocks represent a key source of risk for emerging markets. In these countries, several episodes of crises and economic downturns were triggered by external factors.1 One question levied by the literature is whether the exchange rate regime plays a role in reducing countries' vulnerability to these shocks. Following a sequence of financial crises in the 1990s, a new generation of currency crises models placed corporate behavior at the center of the debate about the relationship between countries' external vulnerability and the exchange rate regime. In these models, a fixed exchange rate regime would increase countries' vulnerability by leading companies to disregard the exchange rate risk, biasing their borrowing towards foreign currency denominated debt and/or reducing their hedging activities. In opposition, a floating exchange rate regime would help countries to mitigate their external vulnerability by inducing companies to take seriously their exchange rate exposure. Since these models argue that this behavior would arise due to the guarantees given by the government to companies, this branch of the literature has denominated the implicit guarantees hypothesis. Examples of this literature include Dooley (2000), Burnside et al. (2001), Schneider and Tornell (2003) among others. In a similar direction, Caballero and Krishnamurthy (2003) point out that the lack of financial development in emerging countries is an important factor in determining the share of the debt determined in foreign currency. In their model, financial constraints induce agents to undervalue insuring against exchange rate devaluations, leading to excessive foreign currency denominated debt. Departing from moral hazard issues, Ize and Levy-Yeyati (2003) argue that in a minimum variance portfolio equilibrium, financial dollarization is a function of the relative volatility between the real exchange rate and inflation. Considering that fixed exchange rate regimes are associated to lower real exchange rate volatility, these regimes would lead to higher financial dollarization. Contrasting to these models, Eichengreen and Hausmann (1999) discuss that the choice of the exchange rate regime is of second order importance in determining countries' external vulnerability. The “original sin” literature asserts that currency mismatches arise as the result of the functioning of international financial markets and countries are not able to change this problem by the adoption of domestic economic policies. Some authors also advocate a relationship in the opposite direction. Currency mismatches would lead countries to restrict the fluctuations of the exchange rate; therefore, countries with higher levels of currency mismatches would present a “fear of floating” (Calvo and Reinhardt, 2002). In Moron and Winkelried (2005) and Cook (2004) the authors show that in equilibrium higher levels of currency mismatches lead to lower exchange rate flexibility. Combining the two literatures, Chang and Velasco (2006), Ize (2005) and Cowan and Do (2003) show that fear of floating and currency mismatches are two sides of the same coin where the two facts took place simultaneously and are difficult to disentangle from each other. To what extent the exchange rate regime can alleviate companies' foreign vulnerability by inducing changes in corporate financial policies is still an open question. Empirical studies in this area are still scarce. Martinez and Werner (2002) found that after the financial crisis in Mexico in 1995, companies reduced the currency mismatches in their balance sheets. Performing a similar test than Martinez and Werner (2002) for Brazilian companies between 1996 and 2004, Rossi (2007) confirms that implicit guarantees linked to the adoption of a fixed exchange rate regime biased corporate borrowing towards foreign currency denominated debt and that the floating regime alleviates this problem, leading companies to take seriously their foreign exposure. Similar results were found by Cowan et al. (2005) for a sample of Chilean companies. The authors found that there was a reduction in the level of currency exposure after 1999 when the home currency was let to float. The authors argue that this reduction in exposure took place due to the fact that the floating regime eliminated implicit exchange rate insurance given to firms, forcing them to internalize the exchange rate risk. Also confirming the moral hazard view, Patnaik and Shah (2008) found that Indian companies hold more currency mismatches on their balance sheets in periods of lower exchange rate volatility. Departing from country-case studies, Arteta (2005) finds in a cross-country sample that bank deposit dollarization is greater under floating regimes, while credit dollarization does not appear to differ across regimes; therefore, he finds little support for the view that flexible exchange rate regimes reduce currency mismatches. Kamil (2006) confirms using a sample of companies in seven different Latin-American countries that the adoption of a floating exchange rate regime leads to a higher degree of currency matching on companies' balance sheets. Parsley and Popper (2006) estimating companies' exchange rate exposure found that the adoption of a flexible exchange rate regime also reduces the number of companies with significant exposure to fluctuations of the exchange rate. In addition, Luca and Zhang (2006) using a panel containing data on emerging and developing countries from 1975 to 2000 confirm the two-way relationship between currency mismatches and exchange rate flexibility. They find that mismatched bank portfolios generate fear of floating and this fact leads to an increase in currency mismatches. This paper contributes to this literature by taking a systematic look at the relationship between companies' financial policies and the exchange rate regime. The analysis employs a unique database constructed directly from companies' annual reports containing information about the currency composition of the debt and the use of currency derivatives for a sample of non-financial Brazilian companies from 1996 to 2006, a period in which Brazil adopted two different exchange rate regimes: a (quasi-) fixed and a flexible exchange rate regimes. This transition between two different exchange rate regimes provides an opportunity to analyze whether the adoption of different exchange rate regimes affects corporate foreign vulnerability by inducing changes in financial policies. Consistent with the hypothesis that there is a relationship between corporate financial policies and the exchange rate regime, we find that the floating exchange rate regime led companies to improve their prudential measures to reduce their exchange rate risk. We show that the adoption of a floating exchange rate regime exerts a negative impact on companies' foreign currency borrowing and a positive effect on the use of currency derivatives, indicating that there is a reduction in the level of companies' unhedged foreign liabilities after the adoption of the floating regime. In addition, the paper indicates that this is not the only impact of the adoption of a floating exchange rate regime. The paper shows that a reduction in the currency mismatches in companies' balance sheets takes place after the adoption of the floating exchange rate regime. Under a floating regime firms with higher proportion of foreign sales to total sales are more prone to keep unhedged liabilities and firms in the non-tradable sector are more likely to use currency derivatives. The paper also shows that this adjust in corporate financial policies that happen with the adoption on the floating regime is more pronounced for firms in the highest quantile of risk. Following the discussion on corporate finance about the determinants of companies' capital structure, the paper also shows that besides the exchange rate regime, companies' access to financial markets, investment opportunities and liquidity are important determinants of their foreign currency borrowing and that fixed costs, the possibility of incurring in financial distress and investment opportunities play a role on the determination of their use of currency derivatives. The paper proceeds as follows. In Section 2, I describe the Brazilian experience under both exchange rate regimes and show the data that will be used throughout the text. Section 3 analyzes empirically the impact of the exchange rate regime on corporate financial policies and I estimate the main cross-sectional determinants of company's foreign borrowing and the use of currency derivatives. Section 4 summarizes the results and gives some policy implications.

This paper studies the relationship between the exchange rate regime and companies' financial policies for a sample of non-financial Brazilian companies from 1996 to 2006. We find that the exchange rate regime plays an important role in the determination of companies' financial policies. The results are consistent with the hypothesis that the floating exchange rate regime reduces companies' external vulnerability by leading them to take measures against their exchange rate risk and that the fixed exchange rate regime biases corporate borrowing towards foreign currency denominated debt. I show that the floating exchange rate regime exerts a negative impact on companies' foreign borrowing and a positive effect on the use of currency derivatives. In addition, the results indicate that the floating regime induces companies to lower the currency mismatches in their balance sheets. These results are robust to the method of estimation and inclusion of control variables. Moreover, the paper shows that this reduction in companies' currency mismatches is more pronounced for companies in the highest quantiles of exchange rate risk; therefore, for companies with highest vulnerability to fluctuation in the exchange rate. The results of this analysis indicate that the exchange rate regime is a significant determinant of countries' external vulnerability since it plays an important role on companies' financial policies. This is a contrast to the assertions made by Eichengreen and Hausmann (1999) or Calvo and Mishkin (2003) that the choice of the exchange rate regime is of second order importance in determining countries' external vulnerability. This paper provides evidence that the floating regime can mitigate the problem of the “original sin” by leading companies to reduce their exchange rate exposure, by reducing the currency mismatches on their balance sheets. Such action corroborates Goldstein and Turner (2004) who argue that there might be a relationship between currency mismatches and the exchange rate regime. It is important to emphasize that vulnerabilities remain, and governments should carry out additional economic reforms in order to improve countries' institutions. However, as this paper indicates, the adoption of a floating exchange rate regime by emerging markets like Brazil, indeed leads companies to be more aware of the risk of keeping unhedged positions, reducing the possibility of huge economic downturns. Thus, even if the choice of the exchange rate might not be the primary solution for the reduction of countries' external vulnerability, it is clearly an integral part of the solution toward beneficial economic reforms.