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Volume 15, No.1
Journal Information
  • - Year : 2011 Mar.
  • - Issue :2011 Vol. 15, No. 1
  • - Date : 2011-03-31

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Foreign Exchange Exposures of Korean Firms   


Sungbin Cho

Sungbin Cho is a research fellow with the Department of Finance at the Korea Development Institute. He holds a Ph.D. in Economics from the University of California, Los Angeles. He worked for the IMF in 2001 as a summer intern and published a paper on Korean corporate sector in country report, “Firm Level Analysis of the Korean Corporate Sector: 1996-2000” with Kenneth H. Kang. His research areas are competition policy, corporate finance, corporate governance and mutual funds. He has published journal papers, including “Interdependence of Corporate Control Mechanism and Firm Performance in Korea” (KDI Journal of Economic Policy, 2006), “Potential Foreign Competition and Market Structures: Empirical Analysis and Policy Implications,” (KDI Journal of Economic Policy, 2007, with Yong-Seok Choi), “Performance Evaluation of Equity Funds in Korea” (KDI Journal of Economic Policy, 2010, with Inseok Shin).


Min-Kyu Song

Min-Kyu Song is a Research Fellow at the Korea Institute of Finance (KIF). He worked for the Department of Finance in Korea Development Institute (KDI) and served as the Head of International Finance at Korea Securities Research Insitute (KSRI). He was also a member of Trust Management Committee of the Korea Securities Finance Corporation and a financial analyst for the Bank of Korea. Dr. Song received his Ph.D. in Economics from the University of Texas at Austin in 2005. His research interests include collateral financing, nominal contract, payment system, and financial development. His recent researches include “Foreign Exchange Exposures of Korean Firms (2010),” “How Did Korean Financial Markets Get Infected by the Global Financial Crisis? (2010),” “An Analysis on Intrinsic Bubbles in Korean Stock Markets (2007).”



We measure foreign exchange exposures as sensitivity of firm’s value to FX premium in the CAPM plus FX premium model, and try to find determinants of the exposures; using data of non-financial companies listed in the Korea Exchange from the year 2007 to 2008. Main findings are as follows. If Korean won depreciates, only a small number of firms is benefitted while majority of firms are harmed to the contrary of common knowledge. As a firm’s export increases, the foreign exchange exposure increases up to a certain level and after that it declines. And, smaller firms of negative foreign exchange exposures are more sensitive to foreign exchange changes.Thesesuggestheterogeneouseffectsofforeignexchangerateson industries and firms.


Foreign Exchange Exposure, Foreign Currency Premium, CAPM


F21, G32, O24



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