Korea Trade Review (무역학회지)

Korea Trade Research Association (한국무역학회)
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The Foreign Asset Leverage Effect of Oil & Gas Companies after the Financial Crisis

금융위기 이후 정유산업의 외화자산 레버리지효과 분석

  • Dong-Gyun Kim (Department of International Trade,College of Knowledge Information and Service, Kyonggi University)
  • Received : 2021.01.28
  • Accepted : 2021.04.13
  • Published : 2021.04.30
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Abstract

This study aims to analyze the foreign asset leverage effect on Korean oil & gas companies' foreign profits and to maintain the appropriate foreign asset volume for reducing exchange risk. For a long time, large Korean companies, including oil companies, overheld foreign currency liabilities. For this reason, most large companies have been burdened to hedge exchange risk and this excess limit holding deteriorated total profit and reduced foreign currency asset management efficiency. Our paper proceeds in presenting a three-stage analysis considering diversified exchange risk factors through estimation on transformation of foreign transactions a/c including annual trends of foreign asset and industry specifics. We also supplement incomplete the estimation method through a practical hedging case investigation. Our research parts are differentiated on the analyzing four periods considering period-specifics The FER value of the oil firms ranged from -0.3 to +2.3 over the entire period. The results of the FER Value are volatile and irregular; those results do not represent the industry standard comparative index. The Korean oil firms are over the credit limit without accurate prediction and finance high interest rate funds from foreign-owned banks on the basis on a biased relationship. Since the IMF crisis, liabilities of global firms have decreased. Above all, oil firms need to finance a minimum limit without opportunity losses on the demand forecast and prepare for uncertainty in the market. To reduce exchange risk from the over-the-limit position, we must consider factors that affect the corporate exchange risk on the entire business process, including the contract phase.

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