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Euro Membership as a Real Option Trigger: An Empirical Study of EU15 Manufacturing Firms

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  • Tom Aabo
  • Christos Pantzalis, University of South Florida, United States
Our empirical study of manufacturing firms (NAICS 33) in the 15 countries consisting the EU prior to its 2004 expansion shows that the introduction of the Euro has made firms based in one of the twelve countries that opted to adopt the Euro more inclined than firms based in one of the three non-adopters (UK, Sweden, and Denmark) to exercise various forms of real options such as to establish alliances / partnerships, to enter new markets / market segments, to switch suppliers, and to generally expand in the Euro-area. The study furthermore shows that small, profitable and financially constrained firms are particularly likely to exercise such real options triggered by the introduction of the Euro. The results go beyond the immediate trade effects, which empirical studies have shown to be weak and without trade diversion as to the three non-adopters, and provide important insights about the potential long-term effects of Euro membership
Original languageEnglish
JournalJournal of Applied Corporate Finance
Pages (from-to)117-124
Publication statusPublished - 2007

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