Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms

This article undertakes an in-depth study of the foreign exchange exposure of Malaysian listed firms. We examine several issues related to firm-specific and overall exposure, including an evaluation of the efficacy of adopting a hard-peg on such exposure. Our sample consists of 158 listed firms and...

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Main Authors:	Bacha, Obiyathulla Ismath, Mohamad, Azhar, Syed Mohd Zain, Sharifah Raihan, Mohd. Rasid @ Abdul Rashid, Mohd Eskandar Shah
Format:	Article
Language:	English
Published:	Routledge Taylor & Francis 2013
Subjects:	HG3810 Foreign exchange HG4001 Financial management. Business finance. Corporation finance.
Online Access:	http://irep.iium.edu.my/28578/ http://irep.iium.edu.my/28578/ http://irep.iium.edu.my/28578/ http://irep.iium.edu.my/28578/2/Foreign_Exchange_Exposure_and_Impact_of_Policy_Switch_-_Published_Version.pdf

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spelling	iium-285782015-09-15T06:28:17Z http://irep.iium.edu.my/28578/ Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms Bacha, Obiyathulla Ismath Mohamad, Azhar Syed Mohd Zain, Sharifah Raihan Mohd. Rasid @ Abdul Rashid, Mohd Eskandar Shah HG3810 Foreign exchange HG4001 Financial management. Business finance. Corporation finance. This article undertakes an in-depth study of the foreign exchange exposure of Malaysian listed firms. We examine several issues related to firm-specific and overall exposure, including an evaluation of the efficacy of adopting a hard-peg on such exposure. Our sample consists of 158 listed firms and spans the 16 year period, 1990-2005. A multivariate model using four bilateral exchange rates is used to determine firm level exposure while panel data analysis using a random-effects Generalized Least Squares (GLS) model is used to determine system-wide or aggregate sample exposure. We find a total 71 of our sample firms to have significant exchange rate exposure, a rate substantially higher than that reported for most countries, especially developed ones. The US is by far the single most important source of exposure with 63 of sample firms exposed to it. The sign of the beta coefficient for three of the four currencies are negative, implying that our sample firms are largely net importers in these currencies. We find exposure to be time variant and dependent on the sector within which a firm operates. Interestingly, the panel data analysis which measures aggregate exposure, shows the US to be a significant source of exposure even with the adoption of the hard peg. The change in policy regime to a fixed peg following the crisis appears to have had no impact at either firm-level exposure or overall system-wide exposure. Routledge Taylor & Francis 2013 Article PeerReviewed application/pdf en http://irep.iium.edu.my/28578/2/Foreign_Exchange_Exposure_and_Impact_of_Policy_Switch_-_Published_Version.pdf Bacha, Obiyathulla Ismath and Mohamad, Azhar and Syed Mohd Zain, Sharifah Raihan and Mohd. Rasid @ Abdul Rashid, Mohd Eskandar Shah (2013) Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms. Applied Economics, 45 (20). pp. 2974-2984. ISSN 1466-4283 (O), 0003-6846 (P) http://www.tandfonline.com/doi/abs/10.1080/00036846.2012.684790#preview 10.1080/00036846.2012.684790
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG3810 Foreign exchange HG4001 Financial management. Business finance. Corporation finance.
spellingShingle	HG3810 Foreign exchange HG4001 Financial management. Business finance. Corporation finance. Bacha, Obiyathulla Ismath Mohamad, Azhar Syed Mohd Zain, Sharifah Raihan Mohd. Rasid @ Abdul Rashid, Mohd Eskandar Shah Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms
description	This article undertakes an in-depth study of the foreign exchange exposure of Malaysian listed firms. We examine several issues related to firm-specific and overall exposure, including an evaluation of the efficacy of adopting a hard-peg on such exposure. Our sample consists of 158 listed firms and spans the 16 year period, 1990-2005. A multivariate model using four bilateral exchange rates is used to determine firm level exposure while panel data analysis using a random-effects Generalized Least Squares (GLS) model is used to determine system-wide or aggregate sample exposure. We find a total 71 of our sample firms to have significant exchange rate exposure, a rate substantially higher than that reported for most countries, especially developed ones. The US is by far the single most important source of exposure with 63 of sample firms exposed to it. The sign of the beta coefficient for three of the four currencies are negative, implying that our sample firms are largely net importers in these currencies. We find exposure to be time variant and dependent on the sector within which a firm operates. Interestingly, the panel data analysis which measures aggregate exposure, shows the US to be a significant source of exposure even with the adoption of the hard peg. The change in policy regime to a fixed peg following the crisis appears to have had no impact at either firm-level exposure or overall system-wide exposure.
format	Article
author	Bacha, Obiyathulla Ismath Mohamad, Azhar Syed Mohd Zain, Sharifah Raihan Mohd. Rasid @ Abdul Rashid, Mohd Eskandar Shah
author_facet	Bacha, Obiyathulla Ismath Mohamad, Azhar Syed Mohd Zain, Sharifah Raihan Mohd. Rasid @ Abdul Rashid, Mohd Eskandar Shah
author_sort	Bacha, Obiyathulla Ismath
title	Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms
title_short	Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms
title_full	Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms
title_fullStr	Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms
title_full_unstemmed	Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms
title_sort	foreign exchange exposure and impact of policy switch - the case of malaysian listed firms
publisher	Routledge Taylor & Francis
publishDate	2013
url	http://irep.iium.edu.my/28578/ http://irep.iium.edu.my/28578/ http://irep.iium.edu.my/28578/ http://irep.iium.edu.my/28578/2/Foreign_Exchange_Exposure_and_Impact_of_Policy_Switch_-_Published_Version.pdf
first_indexed	2023-09-18T20:42:06Z
last_indexed	2023-09-18T20:42:06Z
_version_	1777409434009468928

Foreign exchange exposure and impact of policy switch - the case of Malaysian listed firms

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