Investment, financing and exchange rate parity impacts on the currency gains of mexican companies

Resumen

We analyze the impacts on currency gains of companies quoted in the Mexican stock market as a consequence of their investment in long-term assets, intangible assets and property, plant and equipment (PP&E), so as their indebtment in foreign currency and the Mexican peso/USD parity. According to the results of quantile regression analysis going from 1990Q1 to 2023Q2, the main negative impact on currency gains come from debt denominated in USD, followed by the Mexican peso-USD parity which is also negative related to such gains. Intangible assets also have negative impacts on currency gains while PP&E investments enhance them, so as recent investments on fixed assets do, but this last only marginally.  So, our analysis suggests that the currency exposition of Mexican firms can be negative for their profitability and can be seen as warning signs for corporate decisions on overseas operations and financing planning based in foreign currency. Nevertheless, profitability sources also exist and can be used to foster companies’ performance.