Foreign currency borrowing, exports and firm performance: evidence from a currency crisis. Issue 17 (22nd November 2018)

• Record Type: Journal Article
• Authors: Bougheas, Spiros; Lim, Hosung; Mateut, Simona; Mizen, Paul; Yalcin, Cihan
• Is Part Of: European journal of finance. Volume 24:Issue 17(2018)
• Page Start: 1649
• Page End: 1671
• Publication Date: 2018-11-22
• Subjects: Currency crisis -- exports -- foreign currency borrowing; F34 -- F41 -- G21 -- L25; Finance -- Periodicals; Finance -- Europe -- Periodicals; International finance -- Periodicals; 332.094
• DOI: 10.1080/1351847X.2017.1421246
• Languages: English
• ISSNs: 1351-847X

Abstract

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.