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Exchange Rate Sensitivity of Firm Value: Evidence from Nonfinancial Firms Listed on Borsa Istanbul

In: Handbook of Research on Emerging Theories, Models, and Applications of Financial Econometrics

Author

Listed:
  • İbrahim Ethem Güney

    (Central Bank of the Republic of Turkey)

  • Abdullah Kazdal

    (Central Bank of the Republic of Turkey)

  • Doruk Küçüksaraç

    (Central Bank of the Republic of Turkey)

  • Muhammed Hasan Yılmaz

    (Central Bank of the Republic of Turkey)

Abstract

This chapter attempts to quantify the effect of exchange rate on the value of nonfinancial firms listed on Borsa Istanbul. In the first part of the analysis, the regression results using firm-level data show that currency fluctuations tend to influence the stock returns of 44 firms out of 177 firms in the sample in a significant way with negative average foreign exchange (FX) sensitivity coefficient. The sectoral-level analysis indicates that sectors with net FX short position are also subject to higher FX sensitivity with respect to firm value. In the second part, firm-level determinants of FX sensitivity are investigated using quantile regression method. The estimation results indicate that the market value of firms with net FX position surplus tends to respond positively to the depreciation of Turkish lira against the US dollar across all quantiles. It is also observed that the degree of internationalization, firm size, profitability, and growth opportunities are significant determinants of stock market pricing of FX risk.

Suggested Citation

  • İbrahim Ethem Güney & Abdullah Kazdal & Doruk Küçüksaraç & Muhammed Hasan Yılmaz, 2021. "Exchange Rate Sensitivity of Firm Value: Evidence from Nonfinancial Firms Listed on Borsa Istanbul," Springer Books, in: Burcu Adıgüzel Mercangöz (ed.), Handbook of Research on Emerging Theories, Models, and Applications of Financial Econometrics, edition 1, pages 141-165, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-54108-8_6
    DOI: 10.1007/978-3-030-54108-8_6
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    References listed on IDEAS

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