The Research Of China’s Listed Companies’Foreign Exchange Risk Management

Under the condition of global economic integration, and the deeply development of international trade, China’s listed companies face the unprecedented challenges and opportunities. These companies can take advantage of the open economic environment to carry out more international exchange and cooperation, bring in advanced technology, and put their own product to the international. At the same time, mainly due to the international trade settlement currency in U.S dollars, euros, and other hard currency, while the RMB have not been able to become common in the international settlement. Therefore, movements in exchange rates will have a direct impact on the operation results of the companies. Especially after the reform of the RMB exchange rate, the exchange rate regime becomes more flexible, so that the impact of the change in the exchange rate for the earnings of listed companies can not be ignored. So this paper focuses on the year after the reform of the exchange rate regime, with the open economic condition, to analyze the impact of exchange rate fluctuation on China’s listed companies.Firstly, from a theoretical point of view, this paper introduces the history and today of China’s exchange rate regime and the causes. Since the reform of the exchange rate regime, the international economic environment is rapidly changing. First the global financial crisis caused by the U.S subordinated debt crisis occurred, then the European sovereign debt crisis were spreading. In these circumstances, China’s economic still keep in a good condition, so that the fact and the expectation of appreciation of RMB are constantly format. Changes in the exchange rate of the import and export enterprises have two sides, on the one hand, it is helpful to increase the purchasing power of the RMB, on the other hand, it causes our products to loss international competitiveness, these will undoubtedly have a huge impact on the profits of listed companies. Secondly, it comes to the theoretical analysis of the connotation of the listed companies in China foreign exchange risk, measuring method as well as the impact of exchange rate changes on listed companies, precisely because of the change in the exchange rate will be directly or indirectly generate business transactions risk, accounting risk and economic risk, and ultimately channels by the impact of foreign exchange gains and losses or financial costs to affect the company’s profits, so that we need to pay much more attention to the company’s exposure to foreign exchange risk. Thirdly, it discusses the listed different types of foreign exchange risk to get a conclusion that foreign exchange risk in the presence of China’s listed companies is universal. Then we discuss the current situation and existing problems of China’s enterprise management of foreign exchange risk. Due to the reform of China’s exchange rate regime is later than advanced Western countries, the concept of risk management and the system is not perfect, they need for further improvement. Finally this paper use empirical analysis to analyze the impact of exchange rate movements on the listed companies. This article draws on the risk exposure models among China’s Shanghai A shares of105companies. It concluded that the exchange rate risk effects on the revenue of China’s listed companies. The results of empirical analysis are consistent with theoretical expectations. In view of the existence of a significant impact on the foreign exchange risk for listed companies, the paper concludes with means and recommendations of listed companies to avoid foreign exchange risks. We can use Internal method to control risk through foreign exchange transactions, we can sue foreign exchange derivatives to avoid risks, also we can enhance the independent research and development capacity in order to improve their profitability, strengthen risk prevention awareness, enhance risk prevention ability and work together to the maximum to avoid the risk of the enterprise and enhance corporate profit margins.This paper combines theoretical analysis and empirical analysis among the study. This paper chooses the export ratio as an index to study the foreign exchange rate exposure, and the result shows that the empirical analysis has mostly consistent results with theoretical reality. There is no doubt that these results enhance the comprehensiveness and credibility of this study. However, in the model analysis phase, the revenue of the stocks are effected by policy, economic, market structure, etc. China’s financial market is not perfect enough to show the full information of the stocks. At the same time, there are still some non-financial index which cannot be counted which we need to improve in the future. But the overall theoretical and empirical analysis of this paper are enough to reflect the prevalence of the foreign exchange risk in listed companies in China, and also put forward a series of measures to guard against foreign exchange risk, it has actual meaning and reference value.