The Studies On Foreign Exchange Rate Exposure Of The Chinese Transnational Firms And Decisive Factors

After World War 2, the technology of transport and communication has advanced by leaps and bounds, in addition, because of the collaboration among the countries in the world for the promotion of liberalization of trade and capital, large enterprises in each country has successively adopted international operation modes. Under the tide of international trend and across- border development, the Chinese firms have more recognitions of the change and risks of foreign exchange and based on the normal economic activities, investment and hedge purpose, the necessity for participating in the national or international financial market becomes remarkably important. Since 1973 after Bretton Wood System broke down, each country has given up original the fixed exchange rate system and adopted floating exchange rate system, deepening exchange rate margin which affects across-border enterprises more apparently. Therefore, it is necessary to increase the recognition of exchange rate risks for the Chinese transnational firms and set up exchange rate risk system and foreign exchange risk control ability.This essay is to explore the extent of foreign exchange exposure of the Chinese transnational firms and its influential decisive factors, and proceed construction and actual demonstrations through "functional currency", "structural capital", and "strategic resource" in order to adequately describe the total outline of exposure to foreign exchange risk. The main studies can be divided into the several points as follows:(1) If the Chinese transnational firms are affected by exchange rate? If the foreign exchange exposure exists?(2) Based on the "functional currency perspective", if foreign exchange exposure of the Chinese transnational firms is apparent? What are the decisive factors of foreign exchange rate exposure?(3) Based on the "functional capital perspective", if foreign exchange exposure of the Chinese across-border enterprises is apparent? What are the decisive factors of foreign exchange rate exposure?(4) Based on the "strategic resource" perspective, if foreign exchange exposure of the Chinese transnational firms is apparent? What are the decisive factors of exposure to foreign exchange rate?(5) What are the decisive factors of foreign exchange rate exposure that affect the Chinese transnational firms?Through all-around and entire visions and sortation from previous relevant reference, foreign exchange rate exposure of the Chinese transnational firms and decisive factors based on the feasibility of three different perspectives will be explored and induced in this study and decisive factors which affect foreign exchange will be taken as study variables to carry out modeling and demonstration studies by which a new direction of transnational firms can be created.. Study variables taken by different perspectives in the Essay are as follows:(1) Decisive factors of foreign exchange exposure based on "Functional Currency perspective", including the seven ones such as " The rate of income after taxes absolute value of a subsidiary to a parent company in the same period(INCOME) ", " Net value rate of a subsidiary's book value to a parent company ( NETVALUE ) ", "The rate of a subsidiary investment and a parent company's long-term investment ( LINV ) ", "International Breadth(BREADTH) ", " International Depth (DEPTH) ", "Foreign Sale Rate( FSALE ) " as well as "Company's Size ( SIZE ) ".(2) Decisive factors of foreign exchange exposure based on "Functional Capital Perspective", including the ten ones such as "Financial Hedge Capacity(HEDGE) "," Total Risk (RISK) ", " Dividend Payment Rate (DIV) ", " Quick Rate (QR) " , " Paper Market Bid Rate ( MB ) ", " Long-term Debt Rate (LDR) ", "Foreign Asset Rate (FASSET) " , "Foreign Debt Rate(FDEBT) ", " Foreign Sale Rate (FSALE) " as well as " Company Size(SIZE) ".(3) Decisive factors of foreign exchange exposure based on "strategic resource perspective", including the eight ones such as " Financial Hedge Capacity(HEDGE) ", "Vertical Integration Capacity (VIC) ", "Diversified Capacity ( DC ) ", "Merger and Acquisition Capacity ( MAC ) " Alliance Capacity (AC) " ,'Products Difference Capacity (PDC) ", " Foreign Investment (FINV) " as well as "Company's Size (SIZE) ".Finally, in the Essay, the setup of study hypothesis construction of diverse linear return demonstration model of foreign exchange rate exposure will be proceeded based on study variables taken from related above three different perspectives, and the testing will be carried out by using statistics analysis method, including the three section such as Descriptive Statistics Analysis, Related Analysis of Study Valuables, and Demonstration Model Return Analysis. The induced study conclusions are as follows:(1) For the similar direction expected by demonstration results and study hypothesis on "Function Currency Perspective", the results have apparent statistics analysis. Therefore, it can be proved that ten study variables and constructive diverse linear return demonstration model taken based on structural capital perspective have apparent affects on the foreign exchange rate exposure extent of the Chinese transnational firms and direct explanation capacity.(2) For the similar direction expected by demonstration results and study hypothesis on "Structural Capital Perspective", the results have apparent statistics analysis. Therefore, it can be proved that ten study variables and constructive diverse linear return demonstration model taken based on structural capital perspective have apparent affects on the foreign exchange rate exposure extent of the Chinese transnational firms and direct explanation capacity.(3) For the similar direction expected by demonstration results and study hypothesis on "Strategic Resource Perspective", the results have apparent statistics analysis. Therefore, it can be proved that ten study variables and constructive diverse linear return demonstration model taken based on structural capital perspective have apparent affects on the foreign exchange rate exposure extent of the Chinese transnational firms and direct explanation capacity.