Examining the Effects of Exchange Rate Fluctuations on Corporate Profitability and Capital Structure Decisions

Posted: Jun 24, 2023

• Olivia Wright
• Owen Baker
• Owen Nguyen

Abstract

The global economic landscape is characterized by increasingly volatile currency markets, where exchange rate fluctuations have profound implications for corporate financial performance and strategic decision-making. Traditional financial models have approached this relationship through relatively simplistic frameworks that often fail to capture the complex, nonlinear dynamics between currency movements and corporate behavior. This research introduces a novel computational approach that transcends conventional methodologies by integrating quantum-inspired optimization with multimodal deep learning to uncover previously unrecognized patterns in how firms respond to exchange rate volatility. Corporate exposure to currency risk represents a significant challenge in international business, affecting everything from profitability margins to capital structure choices. While existing literature has established broad correlations between exchange rates and financial outcomes, the underlying mechanisms and heterogeneous responses across different types of firms remain poorly understood. Our research addresses this gap by developing a sophisticated analytical framework that can process high-dimensional financial data across multiple temporal scales, enabling a more nuanced understanding of corporate adaptation strategies.