AIB 2012 Conference Proceedings - Academy of International ...

TUESDAY
This paper analyzes firm-level data to estimate the effects of real exchange rate movements on Canadian retail
firms. Using comprehensive firm-level data for Canadian retailers from 1986 to 1997, a period characterized by
a large appreciation and subsequent depreciation of the Canadian dollar, we are able to examine the impact of
exchange rate changes on firm size, profitability and survival. Our results indicate significant adverse effects of
a real Canadian currency appreciation primarily along the intensive margin (firm size measured by sales and
employment) and profits. We find that the effects diminish for firms located farther away from the border and
the rate at which the effects decline differs across different retail trade industries and the measures of firm
performance. (For more information, please contact: Jen Baggs, University of Victoria, Canada:
jenbaggs@uvic.ca)
Do Multinational Corporations Flexibly Respond to Exchange Rate Fluctuations : A Tale of Two Korean MNCs
Young-Ryeol Park, Yonsei University
Sangcheol Song, Bryant University
Gunae Choi, Rutgers University
We examine in this study whether Korean multinational corporations (MNCs) in electronics and steel industries
shift their production across their foreign subsidiaries located in different countries as exchange rates fluctuate.
From a case study of two Korean MNCs (LG Electronics and POSCO), we find that even facing heightened
production costs associated with host -country currency appreciation, Korean MNCs do not shift their production
to less costly locations due to industrial characteristics, limited capacity, and high tariff barriers. We also find
that they reduce the production costs internally, and they also negotiate the costs with employees and suppliers
to adjust the production costs associated with appreciated currency. Our findings imply that certain industrial
and environmental constraints make it difficult for MNCs to take the flexible actions that multinational –
operational- flexibility perspective predicts. (For more information, please contact: Gunae Choi, Rutgers
University, USA: choigunae@hotmail.com)
The Financial Crisis and Cross-Border Perceptions of "Too Big to Fail"
Raquel Oliveira, Central Bank of Brazil
Rafael Felipe Schiozer, Fundação Getúlio Vargas
Lucas Ayres Barros, University of São Paulo
We examine how the perception of an implicit too-big-to-fail policy affects depositor behavior, exploring the
exogenous shock caused by the international turmoil of late 2008 to the Brazilian banking system. We
document a run to the systemically important banks during the crisis, and provide evidence that this movement
is better explained by the depositors' perception of an implicit too-big-to-fail policy than by bank fundamentals.
Nonfinancial firms' decision to run has greater economic importance, but institutional investors run more
heavily. We also find that the share of deposits held by institutional investors affects the decision to run by
other depositors. (For more information, please contact: Rafael Felipe Schiozer, Fundação Getúlio Vargas,
Brazil: rafael.schiozer@fgv.br)
Session: 3.1.9 - Competitive
Track: 3 - IB Theory, FDI, and Entry Mode
Risky Business
Presented On: July 3, 2012 - 09:00-10:15
Chair: Stephen Kobrin, University of Pennsylvania
AIB 2012 Conference Proceedings
Page 196