ARE DOMESTIC FIRMS EXPOSED TO SIMILAR CURRENCY RISK AS INTERNATIONAL TRADING FIRMS?

ARE DOMESTIC FIRMS EXPOSED TO SIMILAR CURRENCY RISK AS INTERNATIONAL TRADING FIRMS?

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This paper reports key findings about currency risk using two samples of listed firms: one sample with zero foreign currency revenues, hence having zero-currency risk; and the other sample with positive revenues in foreign currencies Spoons from foreign transactions.The latter is therefore, exposed to currency risk.Asset pricing theories predict that stocks of currency-risk-exposed firms should suffer significant currency risk, while those firms with zero-currency-risk should not have any effect from currency risk since currency transactions across borders is nil.The latter hypothesis has yet to be tested explicitly, so there is a gap in the literature.We report stock returns are significantly affected not just for firms with foreign-currency revenues but also for firms with zero foreign-currency transactions.

These findings are useful to top management of all businesses Topicals to undertake currency-hedge plans for both domestic and international trading firms.