Exchange rate uncertainty and corporate values: evidence from Taiwan

Authors: Nieh, Chien-Chung¹; Lin, Jeng-Bau²; Wang, Yu-shan³

Source: Applied Financial Economics, Volume 18, Number 14, August 2008 , pp. 1181-1192(12)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

This article first presents a derivation of a theoretical model, which shows that, if the discount rate is large enough, the exchange rate uncertainty (volatility) affects positively the corporate values under the circumstance where competitive firms are risk-averse. Empirical studies are then implemented to test for the relationships between the uncertainty and the corporate values among ten industries investigated in Taiwan. The empirical evidence indicates that there exist long-run equilibrium relationships between the uncertainty and the corporate values among the industries of food, glass, electricity, paper, rubber and steel. The corporate values for each industry are also significantly affected by their previous-period values. Using the Granger causality test for the other four industries, the results find that this uncertainty only has a one-way leading effect on itself.

Document Type: Research article

DOI: http://dx.doi.org/10.1080/09603100701578973

Affiliations: 1: Department of Banking and Finance, Tamkang University, Tamsui, Taiwan 2: Department of Business Administration, National Chung Hsing University, Taiwan 3: Department of Money and Banking, National Kaohsiung First University of Science and Techonology, Taiwan

Publication date: 2008-08-01

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