One possible explanation is the fact that corporations make extensive use of
foreign currency derivatives and other hedging instruments (e.g., foreign debt) to
protect themselves from unexpected movements of exchange rates. To the extent
that US multinationals, exporters, and importers fully cover their exposure to
exchange-rate movements, we should not expect to find any effect of exchange-rate
movements on firms’ values. However, derivatives can also be used for speculative
purposes, as alleged in the much publicized stories of Procter & Gamble and Metallgesellschaft.
This creates a genuine concern for investors and regulators as to what
role derivatives play in a corporation.