Corporate foreign currency borrowing and investment: The case of Hungary

Endresz, Marianna; Harasztosi, Péter

doi:10.1016/j.ememar.2014.09.003

Cited by 17 publications

(10 citation statements)

References 17 publications

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“…Similarly, financial constraints faced in the local market and getting financing abroad amplify the perception of exchange rate risk as a barrier to entering/maintaining exports and penetrating new foreign markets. These results are in line with literature streams related to currency mismatch and exchange pass-through underlining the influence of exchange rate volatility on financial and trade (competitiveness) balance sheet [Endrész, Harasztosi, 2014;Eichengreen et al, 2003].…”

Section: Regression Analysis Of Exchange Rate Risksupporting

confidence: 91%

Exchange Rate Risk as an Obstacle to Export Activity

Brzozowski

Tchorek

2017

Gospodarka Narodowa

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The focus of the paper is on identifying major factors that can determine the vulnerability of Polish manufacturing companies to exchange rate risk. In order to verify our hypotheses, we have estimated logistic regression models based on a unique database to assess internal and external factors that make companies vulnerable to exchange rate risk. Our observations confirm the importance of exchange rate variability as one of the obstacles to starting and conducting export activity as well as expanding it to new markets. We have found that exchange rate risk is particularly severe for companies that are financially constrained and get financing abroad as well as those whose balance sheets are negatively affected by devaluation. Also vulnerable are innovative firms and those that rely more on input imports. Exchange rate volatility appears to be less of a concern for foreign-owned companies and enterprises that have higher shares of euro-denominated receivables and invoice exports in the Polish zloty. Companies competing by means of product quality and distribution channels are also among those less vulnerable to exchange rate risk. Generally, we have confirmed the problem of exchange rate risk as an important cost to export activity. This gives some implications for exchange rate risk management at both the macroeconomic and microeconomic levels as well as for monetary integration.

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Section: Regression Analysis Of Exchange Rate Risksupporting

confidence: 91%

Exchange Rate Risk as an Obstacle to Export Activity

Brzozowski

Tchorek

2017

Gospodarka Narodowa

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“…Endrész et al (2012) shows stylized facts on foreign currency debt in the corporate sector using credit register data Bodnár (2006Bodnár ( , 2009. present survey results on the exchange rate exposure of corporate sector Endrész and Harasztosi (2014). shows that foreign currency debt decreased investment in Hungary.23 The common theme of the far-right manifestations were that Romani people do not work but shirk, they do not deserve transfers, they are criminals.…”

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confidence: 92%

Financial Crisis, Creditor-Debtor Conflict, and Political Extremism

Gyongyosi

Verner

2018

SSRN Journal

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This paper studies the effect of the 2008 financial crisis on the vote share of the populist far right. We use the foreign currency borrowing of households in Hungary as a natural experiment. During the crisis the unexpected and large depreciation of the domestic currency increased the debt burden of households borrowing in foreign currencies but not of households borrowing in the local currency. We use zip code level variation in the prevalence of foreign currency borrowing of households, and show that the exposure to the depreciation significantly affected political preferences. A 10 percent unanticipated rise in indebtedness increased the vote share of the far right by 2.2 percentage points. This effect explains one third of the increase of their popularity by the 2010 election. Foreign currency debtors' naïveté, persistent extremist attitudes, local labor market shocks, and immigration do not account for this increase. We present evidence that the conflict between creditors and debtors about the resolution of the crisis is an important mechanism in the electoral success of the far right. The far right sided with debtors against creditors by advocating policies to help households with foreign currency loans.

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“… As indirect evidence, Bleakley and Cowan () and Endrész and Harasztosi () show that during the global financial crisis, firms using more FC debt significantly reduce their investments, compared to firms using less FC debt due to the balance sheet effect of FC debt. …”

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confidence: 99%

Foreign Currency Debt Financing, Firm Value, and Risk: Evidence from Korea Surrounding the Global Financial Crisis

Bae

Kim

Kwon

2016

Asia Pac J Financ Stud

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We examine the valuation effect of foreign currency (FC) debt financing, relative to local currency (LC) debt financing. Employing extensive data from Korean firms during 2002–2012, we document strong evidence that firms using FC debt financing have significantly lower values than firms using LC debt financing. Even during the pre‐global financial crisis period when the LC value appreciated, we find no evidence of a higher firm value associated with FC debt financing. Further analyses on the possible causes of the negative association of FC debt and firm value reject the conjecture of higher firm risk resulting from the usage of FC debt but lend empirical support for the inefficiency in hedging by Korean firms. While the heavy usages of currency derivatives by Korean firms with FC debt financing lead to lower firm risk, such usages fail to generate higher firm values mainly due to their inefficient and improper hedging with currency derivatives. Our empirical results remain robust to different model and sample specifications.

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Corporate foreign currency borrowing and investment: The case of Hungary

Cited by 17 publications

References 17 publications

Exchange Rate Risk as an Obstacle to Export Activity

Exchange Rate Risk as an Obstacle to Export Activity

Financial Crisis, Creditor-Debtor Conflict, and Political Extremism

Foreign Currency Debt Financing, Firm Value, and Risk: Evidence from Korea Surrounding the Global Financial Crisis

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