The Impact Of Exchange Rate Fluctuation On The Value Of Listed Companies

Since the collapse of the Bretton Woods Monetary System in 1970 s, all the major countries of the world began to implement floating exchange rate system. The use of floating exchange rate system brings opportunities and a series of influence at the same time. As an important factors of open economy, exchange rate plays an important role in a country’s economy. On the one hand, exchange rate effects foreign trade, international financial market liquidity, price level directly in the macro economic environment and financial market, on the other hand, it also affects directly or indirectly on the performance of listed companies, business activities and value. In general, the exchange rate mainly affects the corporate value from the following two aspects. First, in terms of exchange gains and losses, the exchange gains and losses of enterprises that measure assets and liabilities in foreign currencies may be produced;Second, exchange rate changes may affect the enterprise export price advantage, thus the impact will embody in affecting the enterprise sales and profits. On the other hand,the corporate value shows the enterprise’s ability to cope with exchange rate risk,thereby helping to improve the competitiveness of enterprises in the international market.Based on the previous articles on the research results, this article narrate the relationship between the volatility of exchange the corporate value. Given the corresponding to the other currency type. Real effective RMB exchange rate has eliminated the influence of the inflation factor. It reflects the production value of enterprises better. Therefore this article using real effective RMB exchange rate measures currency exchange rate volatility. First of all, this article relates real effective RMB exchange rate and the corporate value to the descriptive statistics and quantitative analysis. On this basis, taking tobin Q as a measure of the corporate value to study how the exchange rate fluctuations affect the corporate value. Considering the different sectors of the market environment, the business model and profit mode,this article study further about how exchange rate fluctuations affect the value of listed companies. Following results were obtained by empirical research and design:(1) In the perspective of the entire industry, there is a negative correlation between fluctuations of the real effective RMB exchange rate and the corporate value.Exchange rate fluctuations on import and export trade is large, it also brings the flow of international funding, and therefore have an impact on the corporate value.(2)Compared to monopoly industries, competitive industries subject to greater exchange rate fluctuations. Especially in competitive industries take import and export trade as the main business, exchange rate fluctuations affect the corporate value more significantly.(3) By comparing the manufacturing and services, it verified that the impact of exchange rate fluctuations on the corporate value of manufacturing is significantly higher than services. Because China mainly export-oriented manufacturing and international bargaining power of export goods is low, and thus price fixing influenced by the international market price. Services, as the tertiary industry, are mainly to provide domestic demand at this stage. Development starts lately in a immature market. With the transfer of industry in our country, the services sector is supported strongly by national policy, and thus its price fixing is weakly affected by international market.This article argues that enterprises that take import and export trade as the main business or exist more foreign debts should pay attention to prevent exchange rate risks, applying flexible business strategy and management to deal with exchange rate risk. When faced foreign exchange risk, derivative financial instruments may be considered as a way to lock in gains to avoid unpredictable losses. Also the enterprises should adjust industrial structure, enhancing international competitiveness through promoting the technological capabilities, to maintain market share in international trade. And to accelerate establishing foreign exchange market, provide more effective channels to avoid exchange rate risk.