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The Effect of Foreign Exchange Exposure on the Financial Performance of MNCs in Rwanda

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  • Adegbite, Grace Oluwafolahanmi

    (MSC in Finance, University of Kigali)

Abstract

Multinational companies that operate in emerging markets like Rwanda must contend with significant risks associated with foreign exchange exposure. The financial performance of these companies can be greatly influenced by fluctuations in currency values. The research aimed to examining how foreign exchange exposure affects the financial performance of multinational companies in Rwanda. The main objective of the research is to investigate the impact of foreign exchange exposure on the financial performance of multinational companies in Rwanda using metrics such as Net Profit Margin. Cross sectional Design was employed. The association between foreign exchange exposure and various financial measures of financial performance has been assessed using statistical analysis of financial data derived from the annual reports of selected multinational companies operating in Rwanda for the period of 2018 to 2022. The targeted population for the research was 50 companies of Multinational companies in Rwanda while sample size of 11 was employed. The study adopted Correlation and Regression Analysis as data analysis technique. The findings of the study revealed that there is no significant influence of foreign exchange exposure on the financial performance of Multinational companies in Rwanda. It was concluded that there is no significant influence of foreign exchange exposure on the financial performance of Multinational companies in Rwanda. The study recommends amongst others that Hedging, insurance, and currency diversifications are examples of currency risk transfer strategies that businesses should employ. It is also advised to use currency swaps, forward markets, and futures markets as instruments to manage foreign exchange risk.

Suggested Citation

  • Adegbite, Grace Oluwafolahanmi, 2024. "The Effect of Foreign Exchange Exposure on the Financial Performance of MNCs in Rwanda," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(6), pages 208-229, June.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:6:p:208-229
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    References listed on IDEAS

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