Work detail

The impact of changing exchange rates on Czech companies

Author: Mgr. Michal Klečka
Year: 2016 - winter
Leaders: PhDr. Jaromír Baxa Ph.D.
Work type: Masters
Language: Czech
Pages: 85
Awards and prizes:
Abstract: This thesis analyses impact of exchange rate exposure in Czech Republic on sample of
ten Czech companies. Empirical part of thesis builds on Nazl, Kar, Akel (2014) and through
market-based approach states significant impact of exchange rate exposure for 40 % of
companies. Higher robustness of results was achieved through improvements in the
methodology which, contrary to related literature, eliminates endogeneity of market index
through instrumental variable. Surprisingly, the correlations between exchange rates and
stocks of Czech companies are positive. An alternative model considering ROA of individual
companies as dependent variable was used to confirm these results. The resulting impact of
exchange rate exposure of alternative model is opposite. This inconsistency of the results of
both models is confusing.
The sudden change in exchange rate policy of the Czech National Bank in November
2013 did not affect the sensitivity of the relationship between exchange rates and stocks. The
reaction of stock market in November 2013 indicates that policy change made by CNB was
not entirely expected. Contrary to the related literature, higher data aggregation decreases the
significance of the exchange rate exposure, signifying higher ability of Czech companies to
reduce exchange rate risk in longer horizons.




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