How Do Large Depreciations Affect Firm Performance?

By Kristin J. Forbes. International Monetary Fund Staff Papers, 2002

191 citations recorded by the source corpus.

This paper examines how 12 “major depreciations” between 1997 and 2000 affected different measures of firm performance in a sample of over 13,500 companies from around the world. Results suggest that in the year after depreciations, firms have significantly higher growth in market capitalization, but significantly lower growth in net income (when measured in local currency). Firms with greater foreign sales exposure have significantly better performance after depreciations, according to a range of indicators. Firms with higher debt ratios tend to have lower net income growth, but there is no robust relationship between debt exposure and the other performance variables. Larger firms frequently have worse performance than smaller firms, although the significance and robustness of this result fluctuates across specifications.

Subfields: Accounting

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Citations in the corpus

SMEs Survival in Time of Crisis: Strategies, Tactics and Commercial Success Stories☆ (2014, background): “…aspect, their relative shortcomings in terms of technological, managerial and human capabilities may reduce their capacity to overcome the economic crisis (Gertler and Gilchrist 1994, Forbes 2002 Beck et al. 2005, Butler and Sullivan 2005, Regnier 2005, Marino et al. 2008 Das and Pradhan 2009).”
Exchange Rate Fluctuations, Financing Constraints, Hedging, and Exports: Evidence from Firm Level Data (2007, background): “[ ] 0 ) 1 ( 1 1 =               + + Π − = − − E it t E it t E it E it t t ww t it E it E it dX dP X P dw dX E e E h w α ⋅⋅⋅⋅⋅⋅⋅⋅⋅ (20)”
Empirical Examination of the Financial Performance of Islamic Banking in Nigeria : A Case Study Approach (2015, background): “These include size (Love and Rachinsky, 2007), growth rate, and liquidity (Gurbuz, Aybars & Kutlu, 2010) and revenue (Forbes, 2002).”
Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Depreciations (2008, background): “Henry (2000a) and Bekaert and Harvey (2000) show that liberalizations increase stock market valuations, and Henry (2000b) shows that they also are associated with investment booms.”
The Asian flu and Russian virus: the international transmission of crises in firm-level data (2004, background): “Forbes (2002a) discusses different channels by which trade spreads currency crises.”
Impact of Exchange Rate Movements on Exports: An Analysis of Indian Non-Financial Sector Firms (2013, unknown): “7 Negative exchange-rate effects based on firm-level data for developed countries are reported e.g. in Greenaway, Kneller, and Zhang (2007), Forbes (2002), and Bernard and Jensen (2004b).”