How Do Investors and Firms React to an Unexpected Currency Appreciation Shock?

Efing, Matthias; Fahlenbrach, Rüdiger; Herpfer, Christoph; Krüger, Philipp

doi:10.2139/ssrn.2709637

Cited by 11 publications

(11 citation statements)

References 42 publications

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“…6 Plausible exceptions to this argument are unexpected changes in the exchange rate regime, like the appreciation of the Swiss franc on January 15, 2015. For evidence on this event see Efing et al (2016). 7…”

Section: A Neoclassical Model With Labor Heterogeneitymentioning

confidence: 99%

Firm Response to Competitive Shocks: Evidence from China’s Minimum Wage Policy

Hau

Huang

Wang

2020

The Review of Economic Studies

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The large regional variation in minimum wage levels during the period 2002–8 in China implies that Chinese manufacturing firms experienced competitive shocks as a function of firm location and their low-wage employment share. We find that minimum wage hikes accelerate the input substitution from labour to capital, reduce employment growth and accelerate total factor productivity growth—particularly among the less productive firms under private Chinese or foreign ownership, but not among state-owned enterprises. The heterogeneous firm response to labour cost shocks can be explained by differences in management practices and suggests that management quality and competitive pressure are complementary.

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Section: A Neoclassical Model With Labor Heterogeneitymentioning

confidence: 99%

Firm Response to Competitive Shocks: Evidence from China’s Minimum Wage Policy

Hau

Huang

Wang

2020

The Review of Economic Studies

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“…2 A number of related papers also examine this episode. Bonadio et al (2019) document the response of unit values at the border, Efing et al (2016) examine the effects on the valuations of publicly listed Swiss firms, and Kaufmann andRenkin (2017, 2019) study the price and employment response of Swiss manufacturing firms and the response of export prices.…”

Section: Introductionmentioning

confidence: 99%

Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation

Auer

Burstein

Lein

2021

American Economic Review

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We dissect the impact of a large and sudden exchange rate appreciation on Swiss border import prices, retail prices, and consumer expenditures on domestic and imported nondurable goods, following the removal of the EUR/CHF floor in January 2015. Cross-sectional variation in border price changes by currency of invoicing carries over to consumer prices and allocations, impacting retail prices of imports and competing domestic goods, as well as import expenditures. We provide measures of the sensitivity of retail import prices to border prices and the sensitivity of import shares to relative prices, which is higher when using retail prices than border prices. (JEL E21, E31, F14, F31, L11)

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“…The Swiss All Share index (SSIP) dropped by almost 9%. Efing et al [2020] find that the negative wealth effects of the Swiss franc shock were stronger for export-oriented firms with a heavy reliance on domestic production.…”

Section: Institutional Setting Of the Swiss Franc Shockmentioning

confidence: 79%

Do Risk Disclosures Matter When it Counts? Evidence from the Swiss Franc Shock

2017

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We examine the relation between disclosure quality and information asymmetry among market participants following an exogenous shock to macroeconomic risk. In 2015 the Swiss National Bank abruptly announced that it would abandon the longstanding minimum euro-Swiss franc exchange rate. We find evidence suggesting that firms with more transparent disclosures regarding their foreign exchange risk exposure ex ante exhibit significantly lower information asymmetry ex post. The information gap in bid-ask spreads appears within 30 minutes of the announcement and persists for two weeks, during which new information gradually substitutes for past disclosures. We validate the information dynamics of past risk disclosures with three field surveys: (1) Sellside analysts emphasize the importance of existing (risk) disclosures in evaluating the translational and transactional effects of the currency shock. (2) Lending banks' credit officers rely on past disclosures as the primary information source available for smaller (unlisted) firms in the immediate aftermath of the shock. (3) Investor-relations managers use existing financial filings as a key resource when communicating with external stakeholders. The results suggest that historical disclosures help investors attenuate information asymmetry in light of unexpected news.

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How Do Investors and Firms React to an Unexpected Currency Appreciation Shock?

Cited by 11 publications

References 42 publications

Firm Response to Competitive Shocks: Evidence from China’s Minimum Wage Policy

Firm Response to Competitive Shocks: Evidence from China’s Minimum Wage Policy

Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation

Do Risk Disclosures Matter When it Counts? Evidence from the Swiss Franc Shock

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