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DOI:http://dx.doi.org/10.26855/jhass.2021.01.007

Do Exchange Rates Affect the Profitability of Multinational Companies? Evidence from China and the USA

Date: February 8,2021 |Hits: 233 Download PDF How to cite this paper

Nan Wang*, Bin Tang

Center for Experimental Economics in Education (CEEE), Shaanxi Normal University, Xi’an, China.

*Corresponding author: Nan Wang

Abstract

The impact of exchange rates on profitability of Multinational Companies is a puzzling and interesting question towards different regional data and relevant issues. This essay has discussed the relationship between exchange rates and profitability. Three perspectives regarding open economy and exchange rates have been employed by us to observe this issue theoretically. First perspective: from the perspective of international trade; Second perspective: from the perspective of decision-making; Third perspective: from the perspective of risk. The data that we collected came from Top 30 Multinational Companies in China and the USA. The required data elements are the value of each company’s rate of ROE, ROCE, EPS and the average annual exchange rates, Gross Domestic Product (GDP) annual growth rates, lending interest rates of China and the USA. From the previous literature and our results, it is reasonable to conclude that the impact of exchange rate changes on profitability is not significant for Top30 MNCs based on China and the USA. Many multinational companies will hedge foreign exchange rate risk by using various financial instruments. The article also reveals the multinational company profitability varies from the domestic regimes and company individuality.

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How to cite this paper

Do Exchange Rates Affect the Profitability of Multinational Companies? Evidence from China and the USA

How to cite this paper: Nan Wang, Bin Tang. (2021) Do Exchange Rates Affect the Profitability of Multinational Companies? Evidence from China and the USA. Journal of Humanities, Arts and Social Science5(1), 47-68.

DOI: http://dx.doi.org/10.26855/jhass.2021.01.007

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