| Abstract: |
We examine the impact of renminbi revaluation on firm valuations, considering
two surprise announcements of changes in China’s exchange rate policy in 2005
and 2010 and data on 6,050 firms in 44 countries. Renminbi appreciation has a
positive effect on firms exporting to China but little positive or even a
negative impact on those providing inputs for China’s processing exports.
Stock prices rise for firms competing with China in their home market while
falling for firms importing Chinese products with large imported-input
content. Renminbi appreciation also reduces the valuation of
financially-constrained firms, particularly in more financially integrated
countries. |