The Foreign Exchange Rate Exposure Management Methods And Effect Of Chinese Listed Manufacturing Companies

Since the "811" exchange reform,the RMB exchange rate presents a large fluctuation different from the past,which makes the operation of Chinese enterprises face greater risks and challenges.In the context of China's financial openness,the trend of RMB exchange rate liberalization is clear,and the frequently changing exchange rate will become an important part of the business environment.Studying the impact of exchange rate fluctuations on business operations,the companies' risk management methods and effects,have important theoretical and practical significance.The tools for managing foreign exchange risk can be divided into three categories: foreign exchange derivatives,foreign currency debt and operational hedging.Foreign exchange derivatives can be used to hedge short-term trading exposures.Operating hedges are often used to hedge exposure to foreign exchange rate from long-term operations.Diverse duration of foreign currency debt can also be used to hedge exposure from different periods of time.In the last 30 years,there are many discussions about these hedging methods in the international academic community.However,in China,due to the exchange rate system and information disclosure,the research results are rare.This paper takes the regulations for mandatory disclosure of foreign exchange derivatives in 2007 as the starting point of time,and studies the foreign exchange risk management situation and management effect of China's listed manufacturing companies from 2007 to 2016.According to the GICS industry classification,a total of 1014 manufacturing enterprises with transaction records of not less than 5 years,no major changes in the main business,and no abnormal fluctuations in monthly stock returns were selected from all listed companies.The sample companies were classified to different groups and analyzed by classification,comparative analysis and regression analysis.The foreign exchange risk exposure coefficient of the samples were calculated and analyzed,and the foreign exchange risk management methods were quantitatively and qualitatively analyzed.The research results are as follows: First,the foreign exchange risk exposure coefficient is generally in line with theoretical expectations,and companies' foreign sale as well as competition are two main factors that affect the exposure level of foreign exchange risk.Those with higher percentage of foreign sale,operating in more competitive industry,face higher level of foreign exchange exposure.Second,companies using of hedge method are cautious on the whole,with little speculative use.Part of the enterprises should have implemented hedge activity but did not take any measures.Through observing different groups,samples hedging activities are correspond to their exposure levels overall.Third,hedging activities can more or less reduce samples' exposure level,and the hedging effect is related to their gross exposure.Those with higher gross exposure have more significant hedging effect.Forth,from the perspective of different hedge methods,the effect of foreign currency debt is most significant.Operational hedging combined with foreign currency debt can further enhance the hedging effect.The effect of foreign currency derivatives is insignificant.