FOREIGN EXCHANGE RISK AND FINANCIAL PERFORMANCE: THE CASE OF TURKEY
Yıl 2016,
Cilt: 4 Sayı: 2, 1 - 15, 30.10.2016
Deniz Parlak
,
Hüseyin İlhan
Öz
The purpose of this study is to investigate the magnitude of foreign exchange open positions of manufacturing and service sector companies, to determine the effect of open positions on companies’ financial performance and to find out the factors that contribute to the firms’ tendency of keeping short foreign exchange position. The analysis conducted on 30 firms for the period spanning from the third quarter of 2012 to the second quarter of 2015 showed that operating profitability of the firms with short foreign exchange position was lower than operating profitability of firms with long foreign exchange position. The performed ANOVA test indicated that companies with short foreign exchange positions were able to increase their overall profitability to the same level as companies with long foreign exchange positions in periods when local currency was overvalued, but exposed to serious losses in periods of local currency devaluation. Applied regression analysis revealed that companies which had short foreign exchange position in the present period had higher liquidity and asset efficiency and lower overall profitability than companies with long foreign exchange position in the previous period.
Kaynakça
- Aliber R.Z., 1976. Equilibrium and Disequilibrium in the International Money Market. Review of World Economics, 112, (1), 25-52.
- Bekaert, G., & Hodrick, R.J., 2009. International Financial Management. NewYork, Pearson Prentice Hall.
- Brealey, R.A., Stewart, C. M., & Allen, F. 2011. Principles of Corporate Finance. New York, McGraw-Hill / Irwin.
- Christoffersen, P.V. 2012. Elements of Financial Risk Management. Amsterdam, Elsevier.
- Diffu, I., 2011. Relationship between foreign exchange risk and financial performance of airline companies in Kenya, a case study of Kenya Airways. Unpublished MBA project, University of Nairobi.
- Dufey, G.,& Srinivasulu, S.L. 1983. The Case for Corporate Management of Foreign Exchange Risk. Financial Management, 12(4): 54-62.
- Guay, W. & Kothari, S.P., 2003. How Much do Firms Gedge with Derivatives? Journal of Financial Economics, 70: 423-461.
- Habibnia, A., 2013. Foreign Exchange Rate Risk Measurement and Management, Paper presented at 5th Conference on Development of Financing System, Tehran, Iran.
- Kesriyeli, M., Ö. & Yiğit, S. 2005. Corporate Sector Debt Composition and Exchange Rate Balance Sheet Effect in Turkey, CBT Working Paper, No 05/16, Central Bank of Turkey.
- Rogoff, K. 1996. The Purchasing Power Parity Puzzle”, Journal of Economic Literature 34; 647-668.
- Runo, N.F. 2013. Relationship Between Foreign Exchange Risk and Profitability of Oil Companies Listed in Nairobi Securities Exchange. Unpublished doctoral dissertation, University Of Nairobi.
FOREIGN EXCHANGE RISK AND FINANCIAL PERFORMANCE: THE CASE OF TURKEY
Yıl 2016,
Cilt: 4 Sayı: 2, 1 - 15, 30.10.2016
Deniz Parlak
,
Hüseyin İlhan
Öz
The purpose of this study is to investigate the magnitude of foreign exchange open positions of manufacturing and service sector companies, to determine the effect of open positions on companies’ financial performance and to find out the factors that contribute to the firms’ tendency of keeping short foreign exchange position. The analysis conducted on 30 firms for the period spanning from the third quarter of 2012 to the second quarter of 2015 showed that operating profitability of the firms with short foreign exchange position was lower than operating profitability of firms with long foreign exchange position. The performed ANOVA test indicated that companies with short foreign exchange positions were able to increase their overall profitability to the same level as companies with long foreign exchange positions in periods when local currency was overvalued, but exposed to serious losses in periods of local currency devaluation. Applied regression analysis revealed that companies which had short foreign exchange position in the present period had higher liquidity and asset efficiency and lower overall profitability than companies with long foreign exchange position in the previous period.
Kaynakça
- Aliber R.Z., 1976. Equilibrium and Disequilibrium in the International Money Market. Review of World Economics, 112, (1), 25-52.
- Bekaert, G., & Hodrick, R.J., 2009. International Financial Management. NewYork, Pearson Prentice Hall.
- Brealey, R.A., Stewart, C. M., & Allen, F. 2011. Principles of Corporate Finance. New York, McGraw-Hill / Irwin.
- Christoffersen, P.V. 2012. Elements of Financial Risk Management. Amsterdam, Elsevier.
- Diffu, I., 2011. Relationship between foreign exchange risk and financial performance of airline companies in Kenya, a case study of Kenya Airways. Unpublished MBA project, University of Nairobi.
- Dufey, G.,& Srinivasulu, S.L. 1983. The Case for Corporate Management of Foreign Exchange Risk. Financial Management, 12(4): 54-62.
- Guay, W. & Kothari, S.P., 2003. How Much do Firms Gedge with Derivatives? Journal of Financial Economics, 70: 423-461.
- Habibnia, A., 2013. Foreign Exchange Rate Risk Measurement and Management, Paper presented at 5th Conference on Development of Financing System, Tehran, Iran.
- Kesriyeli, M., Ö. & Yiğit, S. 2005. Corporate Sector Debt Composition and Exchange Rate Balance Sheet Effect in Turkey, CBT Working Paper, No 05/16, Central Bank of Turkey.
- Rogoff, K. 1996. The Purchasing Power Parity Puzzle”, Journal of Economic Literature 34; 647-668.
- Runo, N.F. 2013. Relationship Between Foreign Exchange Risk and Profitability of Oil Companies Listed in Nairobi Securities Exchange. Unpublished doctoral dissertation, University Of Nairobi.