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The Research on How Exchange Gains and Losses Impact Listed Corporation’s Proift within China

Author: TangWenZuo
Tutor: YaoXiaoYi
School: Hunan University
Course: Finance
Keywords: Exchange gains and losses Financial cost Net profit RMB settlement
CLC: F275.4
Type: Master's thesis
Year: 2012
Downloads: 33
Quote: 0
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Abstract


Since the RMB exchange rate reform, especially the second exchange rate reformoccurred in July21th,2005. The RMB exchange rate is always in the rising channel.The fluctuation of RMB exchange rate is far greater than before, the fluctuation rangefor exchanging dollar extended to1%. As to listed company which is greatlyinfluenced by exchange rate, its gains or losses from exchange rate fluctuation is moreunstable. It requires the enterprise to obtain higher risk control ability.In China, industries greatly affected by exchange rate fluctuation are those thatobtaining foreign exchange liabilities, importing raw materials for produce, exportinggoods overseas and providing financial services. The first two types will gain profitsfrom exchange rate appreciation, while the other two types of corporation will sufferlosses. Recent years, the annual report of listed corporation disclosures that exchangegains and losses account for the financial cost is rising, which affects the enterprisenet profit.Under this background, the paper collected annual reports of50listedcorporations since2005to2011,including petrochemical, aviation, electric power,steel, nonferrous metals, medical, financial etc. We classify these industries by theirattributes and analyse the change of their exchange gains and losses in recent years.And then make an empirical research on that if the exchange gains and lossesinfluence the listed company’s profit. We find that the exchange gains and losses arepositively related to net profit. And also the scale of the company will influence theexchange gains and losses on a certain extent. On this basis, by choosing therepresentative listed corporations of different industries, we do some research on therelation of the exchange gains and losses and their profits of different industries. Theresult shows that beta value is different for different industries. It reflects markedcharacteristics.Finally, the paper put forward some advices that our government should steadypromote the RMB exchange rate formation mechanism reform, effectively promotethe RMB settlement of cross-border trade, accelerate the establishment of RMBoffshore financial market. Our enterprise should determine the reasonable operatingobjectives and actively utilize the financial derivatives. So that to avoid exchange raterisk, improve enterprise’s net profit, enhance our international status and internationalinfluence.IV

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CLC: > Economic > Economic planning and management > Enterprise economy > Corporate Financial Management > Profit and income distribution
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