Foreign currency borrowing, exports and firm performance: evidence from a currency crisis

Bougheas, Spiros; Lim, Hosung; Mateut, Simona; Mizen, Paul; Yalcin, Cihan

Abstract

This paper develops a simple signaling model of foreign currency borrowing that yields predictions about firm survival and performance during a currency crisis. Using a large panel of firm level data for South Korea we offer empirical support for many of the predictions of our model, while others support predictions that cannot be tested using our data. Our paper demonstrates that although firms that borrow in foreign currency are more likely to exit after the currency collapses, those that continue to produce perform better. Among them, the best performers are exporters whose foreign sales are more competitively priced under a devalued currency.

Citation

Bougheas, S., Lim, H., Mateut, S., Mizen, P., & Yalcin, C. (2018). Foreign currency borrowing, exports and firm performance: evidence from a currency crisis. European Journal of Finance, 24(17), 1649-1671. https://doi.org/10.1080/1351847x.2017.1421246

• Journal Article Type: Article
• Acceptance Date: Dec 20, 2017
• Online Publication Date: Jan 11, 2018
• Publication Date: Nov 22, 2018
• Deposit Date: Dec 21, 2017
• Publicly Available Date: Jul 12, 2019
• Journal: European Journal of Finance
• Print ISSN: 1351-847X
• Electronic ISSN: 1466-4364
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 24
• Issue: 17
• Pages: 1649-1671
• DOI: https://doi.org/10.1080/1351847x.2017.1421246
• Keywords: Currency crisis; Exports; Foreign currency borrowing
• Public URL: https://nottingham-repository.worktribe.com/output/903886
• Publisher URL: https://www.tandfonline.com/doi/full/10.1080/1351847X.2017.1421246
• Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in European Journal of Finance on 11 January 2018, available online: http://www.tandfonline.com/10.1080/1351847X.2017.1421246
• Contract Date: Dec 21, 2017