A Research On The Foreign Exchange Rate Exposure And Its Influencing Factors Of Chinese Multinational Companies

The purpose of this paper is to study the foreign exchange rare exposure and its influencing factors of Chinese listed multinational corporations.After the People's Bank of China initiated the reform of the RMB exchange rate formation mechanism on July 21,2005,China's exchange rate system has shifted from a fixed exchange rate system to a managed floating exchange rate system.Since then,with the acceleration of the reform of the RMB exchange rate system and the steady advancement of the internationalization of the RMB,the volatility of the RMB exchange rate has increased,which has made the company's foreign exchange risk problems prominent.It is conventional wisdom that changes in exchange rates will affect the value of an enterprise by affecting the relative price of the commodity.Exchange gains and losses will also affect the company's operating performance through the company's financial expenses.However,the empirical results of the predecessors show that only a small number of multinational companies are facing significant foreign exchange rate exposure.This paper sorts out the reasons for this contradiction.Based on the contradiction between the above theory and the empirical results,this paper hopes to explore the foreign exchange rate exposure of multinational companies and the factors affecting the exposure under the macro background of increasing exchange rate flexibility.The sample of this paper is multinational companies,that is,a listed company whose foreign business income accounts for more than 10% of its total operating income,covering a span of time between August 2005 and December 2018.This paper divides the time series into four sub-periods and finds that about 9 percent of our sample multinationals' stock returns experienced economically significant exposure effects at the 10 percent significance level.Then,after counting the classification of the sample companies,most sample companies were found to be manufacturing.Considering that the Chinese government has proposed the "Made in China 2025" as the first ten-year action plan for the implementation of the strategy of building a strong country.If our country has mastered the foreign exchange risk exposure of the manufacturing industry,it will be able to introduce more policies to reduce the exposure of the industry's foreign exchange risks and foster,protect and develop China's manufacturing industry.Then,this paper discusses the influencing factors of foreign exchange rate exposure of multinational corporations,finding that company's size and debt ratio were significantly negatively correlated with foreign exchange rate exposure,and the export ratio and growth opportunities were significantly positively correlated with foreign exchange risk exposure.