Exchange Rate Risk and Corporate Hedging: Evidence from Turkey

Büyükkara, Göknur; Karan, Mehmet Baha; Temiz, Hüseyin; Yıldız, Yılmaz

doi:10.1080/1540496x.2018.1490262

Cited by 4 publications

(8 citation statements)

References 32 publications

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“…For other variables, this study followed Allayannis and Ofek (2001), Judge (2006) and Vural-Yavas (2016) in measuring foreign sales using the ratio of foreign sales to total sales. For firm size, this paper is consistent with other past studies (Ameer 2010;Butt et al 2018;Buyukkara et al 2018;Vural-Yavas 2016;Wahyudi et al 2019) that used the natural logarithm of total asset. The natural logarithm of interest coverage ratio is the measurement of financial distress, following Bartram, Brown and Fehle (2009); Buyukkara et al (2018) and Vural-Yavas (2016).…”

Section: Methodssupporting

confidence: 87%

“…For firm size, this paper is consistent with other past studies (Ameer 2010;Butt et al 2018;Buyukkara et al 2018;Vural-Yavas 2016;Wahyudi et al 2019) that used the natural logarithm of total asset. The natural logarithm of interest coverage ratio is the measurement of financial distress, following Bartram, Brown and Fehle (2009); Buyukkara et al (2018) and Vural-Yavas (2016). Market-to-book value indicates the growth opportunity, similar to past studies (e.g., Ameer 2010; Bae et al 2017;Buyukkara et al 2018;Wahyudi et al 2019).…”

Section: Methodssupporting

confidence: 87%

“…Concerning the odds ratio, for each unit increase in the total asset, the odds of firms to practise hedging increase by 7.3760 times. This relationship is consistent with most of past studies that proved firm size as one of the hedging determinants (Ameer 2010;Butt et al 2018;Buyukkara et al 2018;Vural-Yavas 2016;Wahyudi et al 2019). The odds ratio of SHARIAH variable is positive and insignificant.…”

Section: G a L L E Y P R O O Fsupporting

confidence: 91%

“…Model 1 represents the panel multiple logistic regression which tests the hypothesis that the decision to practise hedging (hedge = 1, not hedge = 0) is a function of the following factors -foreign sales ratio (FSR), total foreign currency exposure (TOTFCR), net foreign currency exposure (NETFCR), Shariah-compliant status (SHARIAH), firm size (SIZE), financial distress (FID), and growth opportunities (GOP). The use of multiple panel logistic regression analysis is consistent with past studies (Butt et al 2018;Buyukkara et al 2018;Danila & Huang 2016;Vural-Yavas 2016;Wahyudi et al 2019…”

Section: Methodssupporting

confidence: 81%

“…The natural logarithm of interest coverage ratio is the measurement of financial distress, following Bartram, Brown and Fehle (2009); Buyukkara et al (2018) and Vural-Yavas (2016). Market-to-book value indicates the growth opportunity, similar to past studies (e.g., Ameer 2010; Bae et al 2017;Buyukkara et al 2018;Wahyudi et al 2019). This study finally has a sample of 117 non-financial multinational firms listed on Bursa Malaysia from 2010 to 2015.…”

Section: Methodsmentioning

confidence: 99%

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Impact of Foreign Exchange Exposure and Shariah-compliant Status on Malaysian Firms’ Hedging Practice

Wahab¹,

Abdul-Rahim²,

Janor³

2020

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This study investigates the impact of foreign exchange (forex) exposure and Shariah-compliant status on firms' decision to practise hedging. It employs panel multiple and multinomial logistic regression on 702 firm-year observations from 117 non-financial listed firms over the period from 2010 to 2015. The sample consists of 70% Shariah-compliant firms, representative of the 74%-85% Shariah-compliant firms listed on Bursa Malaysia during the study period. From the multinomial logistic regression, this study finds total and net foreign currency exposures are significant in predicting hedging for firms that practice one and two hedging instruments. Moreover, the results also reveal that Shariah-compliant status always significantly and directly influence firms that hedge, except for firms that use four hedging instruments. This study contributes to the literature by introducing direct measurements of foreign currency exposure which prove to be significant indicators of forex exposure. Accurate measurement of forex exposure is crucial as it has implications on the firms' ability to predict its cash flows, commit to future projects, and subsequently, increase its value. Since firms do not disclose whether the instruments used are conventional or Shariah-compliant, this study assumes that all instruments are conventional and therefore, being Shariah-compliant hinder the firms from practising hedging. However, the results reveal those firms that hedge are indeed Shariah-compliant. This finding should raise a great concern among the Islamic capital market regulators to require stricter rules and greater transparency among Shariah-compliant firms.

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