Diversification and firm risk: New evidence on exchange rate exposure

IF 5.4 2区经济学 Q1 BUSINESS, FINANCE

Journal of International Financial Markets Institutions & Money Pub Date : 2025-04-04 DOI:10.1016/j.intfin.2025.102158

Taek Ho Kwon , Sung C. Bae , Chenyang Liu

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引用次数: 0

Abstract

This study examines the effect of industrial diversification on exchange rate exposure based on the resource-based and portfolio views of corporate diversification. Sampling Korean firms, we report new evidence that once the effect of geographic diversification is controlled and the self-selection bias is corrected, industrial diversification provides a strong positive effect in reducing exchange rate exposure. The mitigating effect of industrial diversification on FX exposure is more pronounced for geographically diversified firms which are in nature highly exposed to FX risk. Our results indicate that industrial diversification helps firms with international operations reduce their exchange rate exposure, supporting the complementary role of industrial diversification in managing FX risk associated with geographic diversification. Our study offers further discussions on potential mechanisms through which industrial and geographic diversification interacts in FX risk reduction.

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来源期刊

Journal of International Financial Markets Institutions & Money Multiple-

CiteScore

6.60

自引率

10.00%

发文量

142

期刊介绍： International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.