1. Introduction
Exchange-rate movements affect expected future cash flows, and therefore the
value, of large multinationals, small exporters (importers) and import competitors,
by changing the home currency value of foreign revenues (costs) and the terms of
competition. In light of this, it is surprising that previous research in the area (Jorion,
1990; Amihud, 1993; Bodnar and Gentry, 1993) finds that US multinationals,
exporters, and manufacturing industries are not significantly affected by exchange rate
movements.