An Empirical Analysis of Foreign Exchange Exposure of CNX 100 Companies
Published: 2017
Author(s) Name: Sriram Mahadevan |
Author(s) Affiliation: Assistant Professor-Finance, SDM Institute for Management Development, Mysuru, Karnataka, India.
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Abstract
The present study has empirically examined the level
of foreign exchange exposure and its determinants of
CNX 100 companies. For the purpose of study, the
relationship between exchange rate changes and stock
returns for a sample of 82 companies was determined
for the period April 2011-March 2016. The study finds
that 49% of the sample companies had significant
positive foreign exchange rate exposure and the found
that the companies could be exporters or net importers.
To explore factors determining foreign exchange rate
exposure, variables such as export ratio, import ratio,
size of a company, hedging activities were regressed
against the exchange exposure and the study found
that none of the factors was influencing the exchange
rate exposure. The study concludes that the reasons
for insignificant influence of the variables could be the
natural hedging practices of companies, offsetting of
exports and imports and heterogeneous of the sample
size. The study offers few directions for future research
in this area.
Keywords: CNX 100 Companies, Foreign Exchange Rate Exposure, Export Ratio, Import Ratio, Size, Hedging
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