Essays on Corporate Exposure to Macroeconomic Risk

Abstract: Uncertainties in the macro economy are important sources of risk in today’s business world. Unexpected changes in exchange rates, interest rates, and inflation rates can lead to changes in corporate wealth and competitiveness and, in the extension, corporate market values – to what extent is the topic of this thesis. The thesis consists of four essays that explore different aspects of corporate exposures to macroeconomic risks. The first essay investigates to what extent market values of EU firms are exposed to changes in exchange, interest, and inflation rates, and analyses the importance of taking correlations among exchange, interest, and inflation rates into consideration when assessing risk exposure. The second essay instead answers the question, do market values exhibit the same sensitivity to increases and decreases, and large and small changes, in exchange, interest, and inflation rates? The third essay investigates if firms operating in different industries and located in different countries are differently exposed to exchange-rate, interest-rate, and inflation risk. Finally, the fourth essay analyses the importance of country-differences in macroeconomic risk exposures to monetary policymaking within the Economic and Monetary Union.