This paper reviews previous studies on the foreign exchange exposures of Korean firms, and

attempts to draw implications for researchers and practitioners. Studies on the corporate

exchange exposures in Korea began from early 1980s. Early researchers were interested in how

to define exchange rate risks and how to measure exchange exposures. Since then, a large

number of studies have been devoted to estimating exchange exposures, and analyzing their

characteristics. Especially, the Asian Financial Crisis in 1997 contributed to re-evaluating the

sense of exchange exposures in corporate management. After Korea’s adoption of floating exchange

rate system, researches focus on estimation of exchange exposures, and thereafter the activities

to manage exchange exposures have sharply increased. Meanwhile, derivatives trading of Korean

firms began to appear in accounting reports from 1999, and quite a few studies tested the effect

of derivatives trading on the exchange exposure management. Recently, a few studies are trying

to analyze exchange exposures with greater precision by dividing the exchange exposures into

expected ones and observed ones. Those studies examine the relatedness of the difference of

exposures to the effect of exposure management activities. Our review of previous studies shows

that Korean firms have been shown to be exposed to exchange rate changes and that they have

made efforts to manage their exposures. Not a few studies report that exchange rate changes

affect firm value with time lag, and/or that the effect of exchange rate changes on firm value

gets along asymmetrically with the direction of exchange rate changes. Previous studies also show

that Korean firms need to make approach systematically to estimating their exchange exposures.

Kwon, Taek Ho(2014), "Korean Firms’ Foreign Exchange Exposure and its Management: A Literature Review", Korean Management Review, 43(6), 2011-2037

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