한국기업의 환노출 특성에 관한 연구

The Characteristics of Exchange Rate Exposure in Korean Firms

&nbsp;&nbsp;This paper studies the effects of unexpected exchange rate movements on the stock returns of Korean firms. Existing studies investigate almost exclusively linear foreign exchange rate exposure since Adler and Dumas (1984) has suggested regression analysis with linear foreign exchange rate variables. However, financial theory predicts that the exposure of firms may have a nonlinear component due to nonlinear relationships between exchange rates and corporate cash flow. Motivated by these potential shortcomings in the empirical literatures, this paper examines the foreign exchange rate exposure using improved methodologies used by Bartram (2004), which adopted nonlinear exposure in addition to the existing linear exposure. One of the main purposes of this paper is that to examine whether the low significance of the effect of exchange rate changes on firm value reported in previous studies can be explained by the fact that only the linear exposure component has been estimated. The sample includes 645 nonfinancial firms listed on the Korea Stock Exchange from 1992 to 2004. In the second step, a cross-sectional regression analysis studies the determinants of foreign exchange rate exposure such as foreign operation, firm size, foreign debt and other financial variables.<BR>&nbsp;&nbsp;The findings show that linear exposures have some significance for Korean corporations with regard to US dollar, Japanese Yen and real effective exchange rate. In addition, nonlinear exposures are more statistically significant for these foreign exchange rates. Nonlinear regression specification exercised by sign and size bias tests reveal some empirical evidence in support of a nonlinear feature of the exposures.<BR>&nbsp;&nbsp;The result obtained by using nonlinear exposure shows that the effects of depreciation of Korean Won differ depending on the currencies and periods. When Won depreciates for US dollar, more corporations would benefit from it in the period 1 (1992~1994) and the period 4(2002~2004), while more corporations would suffer a loss in the other period. When Won depreciates for Japanese Yen, more corporations would suffer a loss in the whole periods. Confining to the firms that have significant exchange rate exposure, when Won depreciates for US dollar, more corporations would suffer a loss in the whole period but period 1, while when Won depreciates for Japanese Yen, more corporations would suffer a loss in the whole period but period 3.<BR>&nbsp;&nbsp;Significant exchange rate exposures for both Won/USD and Won/Yen have increased from period 1 to period 3 (1999~2001) that covers after-financial crisis period in Korea, which is consistent with the expectation that the exchange rate exposure would rise due to the free-floating exchange rate system. However, significant exchange rate exposures for both currencies dropped in the period 4, the reason for which is assumed to be accounted not only for the decrease of change rate for both exchange rate and stock return, but the rapid increase of investment for derivatives with higher concern for exchange rate risk management.<BR>&nbsp;&nbsp;The ratio of export to total sales, foreign debt ratio, firm size, cash flow ratio, tobin q and long-term debt ratio constitute significant determinants of the foreign exchange rate exposure.<BR>&nbsp;&nbsp;Those results suggest the following implications for economic policies and exchange rate risk management. First, the result that the effects of depreciation of Korean Won differ depending on the currencies and periods means the low need for excessive intervention in the foreign currency market to defend Won. Nonetheless, when Korean Won appreciates only or appreciates more than the currencies of other competing countries, it is necessary to intervene in currency market to adjust the speed and width of appreciation. Second, to reduce the exchange rate exposure, rapid change of exchange rate should be prevented. It is necessary to ac