Translation exposure and firm value, evidence from Australian multinational corporations

Al-Shboul, Mohammad, and Alison, Stewart (2007) Translation exposure and firm value, evidence from Australian multinational corporations. In: Proceedings of the Fifth International Business Research Conference 2007: strands of development. From: Fifth International Business Research Conference 2007: strands of development, 26-27 April 2007, Dubai, United Arab Emirates.

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Abstract

The purpose of this study is to analyse the economic effect of foreign currency translation adjustments and to investigate the relationship between these adjustments and firm value, for a sample of 181 Australian multinational corporations, with foreign subsidiaries concentrated in three specific geographical regions (Asia, Europe and NAFTA). The study is based on collected data for the five-year period from 2000 to 2004, and uses a two-stage market model methodology, resulting in the implementation of a cross-sectional time series model to test for the affect of translation differences on computed excess returns. The study finds that translation adjustments in income statements and in shareholders' equity are significantly related to excess returns. These results are consistent with accounting exposure being contributory to firm value.

Item ID: 3205
Item Type: Conference Item (Refereed Research Paper - E1)
Keywords: accounting exposure; foreign exchange exposure; operating earnings; shareholders' equity; abnormal returns
ISBN: 978-0-646-47042-9
Date Deposited: 09 Dec 2009 22:49
FoR Codes: 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1502 Banking, Finance and Investment > 150201 Finance @ 100%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9101 Macroeconomics > 910104 Exchange Rates @ 51%
91 ECONOMIC FRAMEWORK > 9103 International Trade > 910399 International Trade not elsewhere classified @ 49%
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