Determinants of time varying exchange rate exposure of corporate firms: a panel data evidence from Pakistan
Abstract/Description
In developing countries, lower level of development of derivative markets of foreign currency makes corporate firms sensitive to changes in exchange rate as the exchange rate risk is not properly hedged. In this paper we estimate the time varying exchange rate exposure of a sample of 132 Pakistani firms that are listed on the Pakistan Stock Exchange over the period from 2009 to 2017. Subsequently the paper explores the determinants of exchange rate exposure in a panel data framework to investigate firm specific and macroeconomic variables that can explain the variation in exchange rate exposure. It is found that more profitable firms have low absolute exposure and firms having high debt burden are more sensitive to exchange rate exposure. The results indicate that the time variation in the exchange rate are caused by the variation in business cycle conditions in both the local and global economy.
Keywords
Exchange rate, Pakistan, Business conditions, Corporate firms
Track
Accounting, Law, and Finance
Session Number/Theme
Session 2A
Session Chair
Dr. Hilal Anwar Butt, Institute of Business Administration, Karachi
Session Discussant
Tahira Mariam Jaffery; Zaira Anees; Dr. Sharjeel Ahmed Hasnie; Dr. Falik Shear
Start Date/Time
23-6-2022 4:10 PM
End Date/Time
23-6-2022 4:30 PM
Location
Training Room 3, Marriott Hotel, Karachi
Recommended Citation
Iqbal, J., & Shafi, R. (2022). Determinants of time varying exchange rate exposure of corporate firms: a panel data evidence from Pakistan. 3rd IBA SBS International Conference 2024. Retrieved from https://ir.iba.edu.pk/sbsic/2022/program/22
COinS
Determinants of time varying exchange rate exposure of corporate firms: a panel data evidence from Pakistan
Training Room 3, Marriott Hotel, Karachi
In developing countries, lower level of development of derivative markets of foreign currency makes corporate firms sensitive to changes in exchange rate as the exchange rate risk is not properly hedged. In this paper we estimate the time varying exchange rate exposure of a sample of 132 Pakistani firms that are listed on the Pakistan Stock Exchange over the period from 2009 to 2017. Subsequently the paper explores the determinants of exchange rate exposure in a panel data framework to investigate firm specific and macroeconomic variables that can explain the variation in exchange rate exposure. It is found that more profitable firms have low absolute exposure and firms having high debt burden are more sensitive to exchange rate exposure. The results indicate that the time variation in the exchange rate are caused by the variation in business cycle conditions in both the local and global economy.
