| Summary: | 碩士 === 國立成功大學 === 國際企業研究所碩博士班 === 97 === The floating rate system begins in 1973 after the breakdown of Bretton Woods agreement, currency rate fluctuates all over the world. Besides, hedging can eliminate the currency exposure. Derivative usage can maximize a firm’s value by taxes benefits, reduction in costs of financial distress, and managerial risk aversion.
The purpose of this article is to examine the effect of exchange rate exposure and the use of foreign currency derivatives on information asymmetric in a sample of S&P 100 nonfinancial firms for the period 2005 to 2007.
First, we find that about 47% of our sample experienced significant exchange rate exposure effects in 2007. The high level of exchange rate exposure can be explained by the extent of higher foreign sales, higher current ratio, lower debt ratio and higher book-to-market equity value. Therefore, the estimated exposure to exchange rate fluctuations not only varied substantially across companies but also varied across years. Second, we conjecture the derivatives usage is associated with lower information asymmetry. More importantly, we find a positive link between exchange rate exposure and information asymmetry. However, we fail to find a significant correlation between the currency exposure and information asymmetry.
For the managerial implication, exchange rate risk management and hedging can both maximize the firm’s value and raise transparency between firms and investors that can lower capital cost and increase the firm’s reputation.
|
|---|
