Astudy On Correlation Between Exchange Rate Risk And Corporate Value

Since the reform of the RMB exchange rate regime on July21,2005, RMB is nolonger pegged to dollar, starting to implement a market-oriented, with reference to abasket of currencies and managed floating exchange rate regime.RMB exchange ratehas tended to be more fluctuating. Corporations of our country in most industries areimpacted by exchange rate risk, eroding enterprise value to different degrees.Therefore, deeply study of the correlation between corporate value and exchange raterisk is of great significance.View of this, this paper researches the correlation between corporate value andexchange rate risk deeply by using the methods of both theoretical analysis andempirical testing. This study is mainly divided into three parts: domestic andinternational studies on this subject, theoretical analysis and empirical research.Firstly, this paper introduces domestic and international studies on the correlationbetween corporate value and exchange rate risk. Secondly, make a brief summary of“Enterprise Value Theory” and “Exchange Rate Theory”. Then analyze the RMBexchange rate regime at this stage. Thirdly, collect financial data of358listedcompanies in five years from2008to2012and establish Jorion model to analyze thecorrelation between corporate value and exchange rate risk. At the same time, thispaper further analyzes enterprise characteristic factors that affect exchange rate riskexposure. At last, this paper makes suggestions for listed companies to cope withexchange rate risk.This study reaches the following conclusions: Firstly, exchange rate risk hassignificant influence on corporate value. Exchange rate risk exposure exists in listedcompanies in almost all the industries. Different characteristics of the industry alsomakes foreign exchange risk exposure level differs in various industries. Secondly,this paper confirms that enterprise characteristic factors have great influence onexchange rate risk exposure. A high proportion of export income brings high foreignexchange risk exposure. Companies with large enterprise scale are not easilyinfluenced by exchange rate risk exposure. For the vast majority of industries, listedcompanies with higher current ratio tended to be influenced by exchange rate riskexposure. Companies with high long-term debt ratio are not easily influenced byexchange rate risk exposure.At the end of this paper, in order to reduce the adverse impact of exchange rate risk on the corporate value, some countermeasures and suggestions are proposed.From the micro view, focus on improving the operating, financing and investingactivities of enterprises to increase the ability of coping with exchange rate risk. Fromthe macro view, recommend that the government take appropriate measures atexchange rate policy to establish a favorable macroeconomic environment for thecompanies to avoid exchange rate risk, increasing corporate value.