A Research of ECB’s Foreign Exchange Risk Management—Real Examples of Public Corporations in Electronic Industry

In recent years, businesses of mid to large size have gone beyond domestic markets when considering capital raising options. Due to expansion necessity, businesses engage in various pre-planning events before timely executing capital raising activities. Such pre-planning events include conducting investigation on both domestic and international economic trends; considering pros and cons of various capital injection tools; taking into account of its own financial structure; and of course, the actual capital needed. Indisputably, recent trends have made “Euro Convertible Bond” (ECB) one of very popular and important tools when businesses consider capital injection. This trend does not only impact domestic economic condition as a whole, it also impacts individual businesses immensely.

The main purpose of issuing ECB is to raise capital. However, because ECB raises capital in foreign currencies, exchange gains and losses are inevitable, as businesses’ financial and accounting systems are based in NTD. Generally speaking, businesses pay great attention and manage these types of foreign exchange risks and impact on overall foreign exchange very carefully. They would also utilize “forward exchange”, “options”, and other types of financial tools to minimize ECB risks, or using foreign asset and liability accounts to control and regulate the impact. In addition, governmental authorities would require businesses to well implement relevant risk-prevention measurements when issuing ECB.

To better understand various risk-prevention measurements that businesses take when issuing ECB, and also their management on common foreign exchange risks, this thesis focuses on five different companies in electronic industry. One-on-one interviews were conducted with each of the companies to further recapitulate how companies in electronic industry handle ECB and foreign currency exchange issues. The five companies are Delta Electronic Inc., Compal Electronic Inc., HannStar Display Corp., AmTran Technology, and Silicon Integrated Systems Corp..

According to research, most companies do implement some kind of preventive measurements on ECB and foreign exchange dealings. However, there is still lacking of common guidelines. Specific types of implementation actions businesses take depend on their level of risk endurance, and also the goals on foreign exchange management.