Currency Controls' Consequences for Companies

Sammanfattning: This paper aims to study the implications of the implementation and relaxation of currency controls in Argentina for multinational firms, using a case study on Ericsson Argentina. Firstly, a qualitative analysis is conducted covering the impacts of currency controls for firms with foreign exchange exposure, ways to cope with the restrictions, and implications of the relaxation. Secondly, multivariable regressions are used to support the qualitative analysis by studying impacts on firm value. This is analyzed with respect to theories on the Exposure Puzzle to see how firm value fluctuates with movements in the exchange rate. The foreign exchange exposure is categorized as transactional, translational and economic. External data is collected from the World Bank, Bloomberg and Ambito, combined with internal data from Ericsson's Latin American headquarter in São Paulo, Brazil. Findings show that there was a negative impact on firm value originating from the implementation of currency controls, as well as increased transaction, translation and economic exposure. The paper contributes to existing research on foreign exchange exposure, and guides managers of multinational firms to cope with fiscal and monetary policies as efficient as possible.