Global Engagement and Returns Volatility

Girma, Sourafel; Lancheros, Sandra; Riaño, Alejandro

doi:10.1111/obes.12150

Cited by 6 publications

(3 citation statements)

References 88 publications

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“…This type of acquisition increases the volatility of the acquirer's stock returns by 15-17%. This finding is consistent with the results of Girma et al (2016), who show that the volatility of stock returns of Japanese firms increases when their intensity of horizontal FDI activity-measured as the share of sales accounted for by foreign affiliates-rises.…”

Section: Resultssupporting

confidence: 91%

“…Doing so allows us to capture its well-document short-term fluctuations which would otherwise be smoothed out when volatility is estimated using the type of low-frequency data available in most manufacturing surveys. Our paper is closely related to Girma et al (2016), which studies how changes on the intensive margin of exports and foreign sales carried out by foreign subsidiaries affect the volatility of stock returns of Japanese firms. We differ from Girma et al (2016) in two key respects; first, while they study how relatively smaller changes in the intensive margin of foreign sales affect volatility, we focus instead on larger changes in firms' global engagement along the extensive margin brought about by the acquisition of new firms.…”

Section: Related Literaturementioning

confidence: 99%

“…Our paper is closely related to Girma et al (2016), which studies how changes on the intensive margin of exports and foreign sales carried out by foreign subsidiaries affect the volatility of stock returns of Japanese firms. We differ from Girma et al (2016) in two key respects; first, while they study how relatively smaller changes in the intensive margin of foreign sales affect volatility, we focus instead on larger changes in firms' global engagement along the extensive margin brought about by the acquisition of new firms. Second, we compare the impact of the domestic acquisitions on volatility to that produced by cross-border transactions and show that the impact of the latter is crucially affected by the type of market-developed vs emerging-that a firm expands into.…”

Section: Related Literaturementioning

confidence: 99%

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Corporate Acquisitions and Firm-Level Uncertainty: Domestic versus Cross-Border Deals

2020

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This paper studies the impact of corporate acquisitions on the uncertainty faced by acquiring firms. We use data for UK public companies from 2004 to 2017 and employ a matching estimator combined with difference-in-differences to control for the endogenous selection of firms into acquiring status. Acquisitions exert a large and persistent effect on the volatility of stock returns of acquirers and is characterized by a pecking order: domestic takeovers lead to a reduction in the uncertainty faced by the acquirer, while cross-border acquisitions-particularly those involving target firms in emerging markets-engender a positive response in acquirers' volatility.

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Section: Resultssupporting

confidence: 91%

Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

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Corporate Acquisitions and Firm-Level Uncertainty: Domestic versus Cross-Border Deals

2020

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The degree of international trade and exchange rate exposure—Firm‐level evidence from two small open economies

et al. 2020

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This study investigates exchange rate exposure by comparing Dutch and Belgian listed firms at each point in time using monthly data from 2006 to 2015. Gaps in previous research are addressed by using disaggregated firm‐level data to construct trade‐weighted firm‐specific effective exchange indices and by applying copula theory. Our findings are as follows. First, extreme events leading to non‐normality of stock returns are, at least partially, caused by a firm's international trade status. Second, Dutch listed firms experience stronger exchange rate exposure since they engage more into trade outside the Eurozone than the Belgian listed firms. Third, listed importing firms experience stronger exchange rate exposure than listed exporting firms, which indicates a dual effect of exchange rate risk arising from cash flow effects in both the domestic economy and the foreign market. Overall, our proposed methodology contributes to a better understanding of the link between exchange rate changes and trade, and may therefore be of use to policy makers involved with exchange rate or monetary policy.

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Export characteristics and output volatility: comparative firm-level evidence for CEE countries

et al. 2018

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: The literature shows that openness to trade improves long-term growth but also that it may increase exposure to high output volatility. In this vein, our paper investigates whether exporting and export diversification at the firm level have an effect on the output volatility of firms. We use large representative firm-level databases from Estonia, Hungary, Romania, Slovakia and Slovenia over the last boom-bust cycle in 2004-2012. The results confirm that exporting is related to higher volatility at the firm level. There is also evidence that this effect increased during the Great Recession due to the large negative shocks in export markets. In contrast to the literature and empirical findings for large or advanced countries we do not find a statistically significant and consistent mitigating effect from export diversification in the Central and Eastern European countries. In addition, exporting more products or serving more markets does not necessarily result in higher stability of firm sales. Terms of use: Documents in EconStor may Non-technical summaryThe ability to serve foreign markets is frequently associated with higher efficiency, growth or prosperity. However, several studies have confirmed that involvement in foreign trade tends to increase output volatility. The available macro-level evidence suggests that the higher volatility is a side-effect of the specialisation induced by rising trade and of the sector-specific shocks that dominate GDP volatility. More recent literature indicates that openness to trade does not increase volatility if trade is well diversified (see e.g. Bejan (2006) and Haddad et al. (2013)).We try to shed more light on the link between exporting, export diversification and output volatility using detailed firm-level data. The relatively scarce firm-level evidence available so far offers ambiguous conclusions. Buch et al. (2009) and Kurz and Senses (2015) find exporting to be related to lower volatility, while Vannoorenberghe (2012) and Nguyen and Schaur (2010) find exporting to be related to higher volatility. Our paper contributes to the literature by applying the exact same methodology to large representative firm-level databases from five countries. Data for manufacturing firms from Estonia, Hungary, Romania, Slovakia and Slovenia are used. These Central and Eastern European countries form a good case study as they have all experienced high volatility and openness, but have different diversification patterns.T...

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Global Engagement and Returns Volatility

Cited by 6 publications

References 88 publications

Corporate Acquisitions and Firm-Level Uncertainty: Domestic versus Cross-Border Deals

Corporate Acquisitions and Firm-Level Uncertainty: Domestic versus Cross-Border Deals

The degree of international trade and exchange rate exposure—Firm‐level evidence from two small open economies

Export characteristics and output volatility: comparative firm-level evidence for CEE countries

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