ch11MEASURING AND MANAGINGECONOMIC EXPOSURE(跨国公司财务管理Joseph F. Greco)

1、1Multinational Financial Management Alan Shapiro7th Edition J.Wiley & SonsPower Points byJoseph F. Greco, Ph.D.California State University, Fullerton2CHAPTER 11MEASURING AND MANAGING ECONOMIC EXPOSURE3CHAPTER OVERVIEWI.FOREIGN EXCHANGE RISK AND ECONOMIC EXPOSUREII.THE ECONOMIC CONSEQUENCES OF EX

2、CHANGE RATE CHANGESIII.IDENTIFYING ECONOMIC EXPOSUREIV.CALCULATING ECONOMIC EXPOSUREV.AN OPERATIONAL MEASURE OF EXCHANGE RISKVI.MANAGING OPERATING EXPOSURE4PART I.FOREIGN EXCHANGE RISK AND ECONOMIC EXPOSUREI.FOREIGN EXCHANGE RISKA.Economic exposurefocuses on the impact of currencyfluctuations on fir

3、ms value.1 .Expectations about the fluctuation must be incorporated in all basicdecisions of the firm.5FOREIGN EXCHANGE RISK AND ECONOMIC EXPOSURE2. Definitions:a.Accounting exposureimpact on firms balance sheetb.Economic exposure1.)Transaction 2.)Operating6FOREIGN EXCHANGE RISK AND ECONOMIC EXPOSUR

4、ETHE REAL EXCHANGE RATEthtfttiiee)1()1(7FOREIGN EXCHANGE RISK AND ECONOMIC EXPOSUREB. Real Exchange Rates and Risk1.Nominal v. real exchange rates:the real rate has been adjusted for price changes.8FOREIGN EXCHANGE RISK AND ECONOMIC EXPOSURE3. SUMMARYa.the economic impact of a currency change depend

5、s on the offset by the difference in inflation rates or the real exchange rate.b.It is the relative price changes that ultimately determine a firms long-run exposure. 9PART II. THE ECONOMIC CONSEQUENCES OF EXCHANGE RATE CHANGESII.ECONOMIC CONSEQUENCESA. Transaction exposure1.On-balance sheet2.Off-ba

6、lance sheet10THE ECONOMIC CONSEQUENCES OF EXCHANGE RATE CHANGESII.ECONOMIC CONSEQUENCES (cont)B. Operating Exposure : real rate change1.Pricing flexibility is key2.Product differentiation3.Substitution of inputs11THE ECONOMIC CONSEQUENCES OF EXCHANGE RATE CHANGESII.SUMMARYThe sector of the economy i

7、n which thefirm operates;the sources of the firms inputs;andfluctuations in the real exchange ratedelineate the firms true economicexposure.12PART III. IDENTIFYING ECONOMIC EXPOSUREIII.CASE STUDIES OF ECONOMIC EXPOSUREA. ASPEN SKIING COMPANY1.Firms exchange rate risk affected its sales revenues.13ID

8、ENTIFYING ECONOMIC EXPOSUREA.ASPEN SKIING COMPANY (cont) 2. Although there was no translationrisk, the global market with its exchange rate risk and its competitors impacted market demand.14IDENTIFYING ECONOMIC EXPOSUREB. PETROLEOS MEXICANOS (PEMEX)1.The firms exchange rate riskaffected cost but not

9、 revenues.2.Economic impacta.Revenues: noneb.Costs:decreasedc.Net effect: increased US$ flows15IDENTIFYING ECONOMIC EXPOSUREC. TOYOTA MOTOR COMPANY1.Exchange rate risk affected BOTHrevenues and costs.2.Flow back effect:previously exported goods returnwith increased domestic competition.3.Lower profi

10、t margins domestically16PART IV. CALCULATING ECONOMIC EXPOSUREIV.A quantitative assessment of economicexposure depends on underlying assumptions concerning:A.future cash flows;B.sensitivity to exchange ratechanges.17PART V. AN OPERATIONAL MEASURE OF EXCHANGE RISKV.NEED FOR A WORKABLE APPROACH A. Reg

11、ression Analysis1.Variablesa.Independent: changes in parents cash flowsb.Dependent:Average nominal exchange rate change.18AN OPERATIONAL MEASURE OF EXCHANGE RISKB. REGRESSION EQUATION-approach based on the operational definition of the exchange risk faced by a parent or one of its affiliates:-a comp

12、any faces exchange risk to the extent that variations in the dollar value of the units cash flows are correlated with variations in the nominal exchange rate19AN OPERATIONAL MEASURE OF EXCHANGE RISKwhere CFt = CFt - CFt-1 andCFt is the dollar value of total affiliate(parent)cash flows in period t EX

13、CHt = EXCHt - EXCHt-1 equals the average nominal exchange rate during period t u =a random error term tttuEXCHaCF20AN OPERATIONAL MEASURE OF EXCHANGE RISK1. Output measures:a.Beta coefficient ()measures the association of changes in cash flows to exchange rate changes.21AN OPERATIONAL MEASURE OF EXC

14、HANGE RISKb.the higher the percentage change of cash flow to changes in exchange rates, the greater the economic exposure (higher beta values).22AN OPERATIONAL MEASURE OF EXCHANGE RISKVI.SUMMARY:A.The focus of the accounting profession on the balance sheet impact of currency changes has led to ignor

15、ing the important impact on future cash flows.23AN OPERATIONAL MEASURE OF EXCHANGE RISKB.For firms incurring costs and selling products in foreign countries, the net effect of currency changes may be less important in the long run.24AN OPERATIONAL MEASURE OF EXCHANGE RISKC. To measure exposure prope

16、rly, you must focus on inflation-adjusted or real exchange rates instead of nominal or actual exchange rates.25AN OPERATIONAL MEASURE OF EXCHANGE RISKD.It is difficult in practice to determine what the actual economic impact of a currency change will be. 26PART VI. MANAGING OPERATING EXPOSUREI. INTR

17、ODUCTIONOperating exposure management requireslong-term operating adjustments.A. Real v. Nominal Changes1. Relative price changes leads to marketing and/orproduction revisions27MANAGING OPERATING EXPOSUREB.Proactive Marketing and ProductionInitiatives 1.Marketing:market selectionproduct strategypric

18、ing strategypromotional strategy28MANAGING OPERATING EXPOSUREB.Proactive Marketing and ProductionInitiatives (cont)2.Production:product sourcinginput mixplant locationraising productivity29MANAGING OPERATING EXPOSUREII.Marketing Management AdjustmentsA. Market Selection1.use advantage to carve out m

19、arket share2.Market segmentation30MANAGING OPERATING EXPOSUREB.Pricing strategy: Expectations critical1.If HC value falls, exporter gainscompetitive advantage by increasing unit profitability and market share.2.The higher price elasticity of demand, the more currency riskthe firm faces by product su

20、bstitution.31MANAGING OPERATING EXPOSURE3.Following HC depreciation, localfirm may have much more freedom in its pricing.C.Promotional Strategy32MANAGING OPERATING EXPOSURED.Product Strategyexchange rate changes may alter1.The timing of new product introductions,2.Product deletion ,3.Product innovat

21、ion.33 MANAGING OPERATING EXPOSUREIII.Product Management Adjustmentsproduct sourcing and plant location are the principal variables to manipulate.A.Input mixB.Shift production among plantsC.Plant locationD.Raising productivity34MANAGING OPERATING EXPOSUREIV.Planning For Exchange-Rate ChangesA.With b