Year 2016, Volume 4 , Issue 2, Pages 1 - 15 2016-10-30

FOREIGN EXCHANGE RISK AND FINANCIAL PERFORMANCE: THE CASE OF TURKEY
FOREIGN EXCHANGE RISK AND FINANCIAL PERFORMANCE: THE CASE OF TURKEY

Deniz PARLAK [1] , Hüseyin İLHAN [2]


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.


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.

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Journal Section ARTICLES
Authors

Author: Deniz PARLAK

Author: Hüseyin İLHAN

Dates

Application Date : March 27, 2017
Acceptance Date : September 27, 2016
Publication Date : October 30, 2016

APA Parlak, D , İlhan, H . (2016). FOREIGN EXCHANGE RISK AND FINANCIAL PERFORMANCE: THE CASE OF TURKEY . International Review of Economics and Management , 4 (2) , 1-15 . Retrieved from https://dergipark.org.tr/en/pub/iremjournal/issue/15724/301454