FOREIGN EXCHANGE RATE VOLATILITY AND FINANCIAL PERFORMANCE OF LISTED MULTINATIONAL FIRMS IN NIGERIA
DOI:
https://doi.org/10.18623/rvd.v23.6472Palabras clave:
Foreign Exchange, Volatility, Firm Value, Financial PerformanceResumen
This study examined the effect of exchange rate volatility on the financial performance of multinational listed firms in Nigeria. Through two models of volatility measuring its sensitivity to operating profit as well as firm values and regressed each on two financial performance metrics. Samples were drawn across multinational firms and 154 observations were generated. Two longitudinal models with outcome variables of Tobin’s Q and Return on Assets were run using Feasible Generalized Least Square Techniques and Panel Corrected Standard Error have evaluated them for appropriateness through preliminary and diagnostic tests. It was discovered that exchange rate sensitivity to firm value significantly have positive effect on financial performance measured as Tobins’ Q while foreign exchange rate sensitivity to operating profit has negative and significant effect on Tobin’s Q. Given the International Fisher Effect (IFE) theoretical submission that the difference in nominal interest rates between two countries reflects the expected changes in their exchange rates and its attendant effects in trades, this study provides evidence to explain how the theory affects multinational firms in Nigeria. The study concluded that forex affected profitability negatively but boosted the stock exchange performance of firms perhaps as a result of stock market boom.
Citas
Abdul-Rahman, A., & Gholami, R. (2020). Islamic finance and COVID-19 recovery: the role profit-loss sharing contract. Jurnal Pengurusan, 59, 7-10. DOI: https://doi.org/10.17576/pengurusan-2020-59-02
Abeysinghe, A. M. N. D., & Wanigasekara, W. A. D. K. J. (2024). The Mediating Effect of Profitability on The Relationship Between Working Capital Management and Shareholder Wealth: Evidence from Colombo Stock Exchange. International Journal of Accountancy, 4(1). DOI: 10.4038/ija.v4i1.58
Ajibola, A. (2025). Tobin-Q valuation methodology of the impact of corporate governance structure on organizational performance: Evidence from Nigeria’s banking sector. BRICS Journal of Economics, 6(1), 35-52. https://brics-econ.arphahub.com/article/134961/download/pdf/
Ali, H., & Li, Y. (2021). Financial literacy, network competency, and smes financial performance: the moderating role of market orientation. The Journal of Asian Finance, Economics and Business, 8(10), 341-352. doi:10.13106/jafeb.2021.vol8.no10.0341
Allayannis, G., & Weston, J. P. (2001). The use of foreign currency derivatives and firm market value. The review of financial studies, 14(1), 243-276. https://doi.org/10.1093/rfs/14.1.243
Ayobami, O. T. (2019). Exchange rate volatility and the performance of manufacturing sector in Nigeria (1981–2016). African Journal of Economic Review, 7(2), 27-41. https://doi.org/10.22004/ag.econ.292357
Bodnar, G. M., & Marston, R. C. (2002). Exchange rate exposure: A simple model. In Global Risk Management: Financial, operational, and insurance strategies (pp. 107-115). Emerald Group Publishing Limited. Doi: https://doi.org/10.1016/S1569-3767(02)03010-8
Bolek, M. (2013). Dynamic and static liquidity measures in working capital strategies. European Scientific Journal, 9(4).DOI: https://core.ac.uk/outputs/328023531/
Camporese, C., (2019). The Renminbi toward the free fluctuation of the exchange rate. https://unitesi.unive.it/handle/20.500.14247/17770
Dada, M. A. (2014). Empirical modeling of money shocks, price and output behaviour in Nigeria (1961 to 2011). Journal of Economics and International Business Management, 2(2), 42-49. https://www.researchgate.net/profile/Matthew-Abiodun-Dada/publication/316806952_Empirical_modeling_of_money_shocks_price_and_output_behaviour_in_Nigeria_1961_to_2011/links/59123c470f7e9b70f496ca15/Empirical-modeling-of-money-shocks-price-and-output-behaviour-in-Nigeria-1961-to-2011.pdf
Dornbusch, R., & Fischer, S. (2003). International financial crises (No. 926). CESifo Working Paper. https://www.econstor.eu/handle/10419/76436
Ezenwa, A. C., Ogbebor, P. I & Alalade, Y. S. (2021). Effect of exchange rate volatility on return on asset of consumer goods manufacturing companies listed in Nigeria. International Journal of Research and Innovation in Social Science, 5(4), 462-470
Ezenwa, N., Adekunle, I. A., & Maialeh, R. (2025). Material ESG Performance and Bid Premium in Merger and Acquisition Deals. International Journal of Finance & Economics. https://doi.org/10.1002/ijfe.70049
Fapetu, O., Adeyeye, P. O., Seyingbo, O. A., Owoeye, S. D (2017). “Exchange rate volatility and stock market performance in Nigeria, Nigerian Journal of Management Science, 6(1), 308-317. https://www.bsum.edu.ng/njms/pdf/vol6N2/njmsVol6No235.pdf
Fisher, I. (1930). The theory of interest. New York: Macmillan.
Gardi, B., Aga, M., & Abdullah, N. N. (2023). Corporate governance and financial reporting quality: The Mediation Role of IFRS. Sustainability, 15(13), 9869. https://doi.org/10.3390/su15139869
Gompers, P.A., (2022). Optimal investment, monitoring, and the staging of venture capital. In Venture Capital (pp. 285-313). Routledge. https://www.taylorfrancis.com/chapters/edit/10.4324/9781315235110-17/optimal-investment-monitoring-staging-venture-capital-paul-gompers
Hossain, S. K., Sultan, M. I., & Ahmed, M. M. (2021). Ownership structure and firm performance: Evidence manufacturing companies listed in Dhaka Stock Exchange. International Journal of Financial, Accounting, and Management, 3(3), 227-243. https://doi.org/10.35912/ijfam.v3i3.621
Ikpoto, E. (December, 2023). Five multinationals dump Nigeria in 10 Months. Punch. Available at https://punchng.com/five-multinationals-dump-nigeria-in-10-months/
Jorion, P. (1990). The exchange-rate exposure of US multinationals. Journal of business, 63(3), 331-345. https://www.jstor.org/stable/2353153
Kenton, W. (2021). Financial Performance. Retrieved Retrieved from from https://www.investopedia.com/terms/f/financialperformance.asp#:~:text=Financial%20pe rformance%20is%20a%20subjective,health%20over%20a%20given%20period.
Kim, B. & Lee, S., (2020). The impact of material and immaterial sustainability on firm performance: The moderating role of franchising strategy. Tourism Management, 77, p.103999. https://doi.org/10.1016/j.tourman.2019.103999
Liman, M., & Mohammed, A. (2018). Operating cash flow and corporate financial performance of listed conglomerate companies in Nigeria. Journal of Humanities and Social Science, 23(2), 1-11.
Madura, J. (2021). International financial management (14th ed.). Cengage Learning. https://books.google.com/books?hl=en&lr=&id=vkNMDwAAQBAJ&oi=fnd&pg=PR1&dq=Madura,+J.+(2021).+International+financial+management+(14th+ed.).+Cengage+Learning.&ots=xfUFiZ02YL&sig=M5OIeN_PzBwGPy5JXVhnPWCb5JQ
Majumder, S. B., & Nag, R. N. (2017). Policy Trilemma in India: Exchange rate stability, independent monetary policy and capital account openness. Global Economy Journal, 17(3), 20170012. https://doi.org/10.1515/gej-2017-0012
Monday, E.E. & Ugbomhe, U.O., (2021). Impact of overall equipment effectiveness on return on investment in the Nigerian cement manufacturing industry. Frontiers in Management and Business, 2(1), 87-94. DOI 10.25082/FMB.2021.01.003
Neupane, B. P. (2020). Profitability determinants of Nepalese commercial banks. PressAcademia procedia, 12(1), 40-45. https://doi.org/10.17261/Pressacademia.2020.1345
Nwafor, A. (June, 2024). Multinational exit costs Nigeria N94Tn in five years. Punch. https://punchng.com/multinationals-exit-costs-nigeria-n94tn-in-five-years/
Obstfeld, M., & Rogoff, K. (1996). Foundations of international macroeconomics. MIT Press. https://books.google.com/books?hl=en&lr=&id=zr34DwAAQBAJ&oi=fnd&pg=PA1&dq=Obstfeld,+M.,+%26+Rogoff,+K.+(1996).+Foundations+of+international+macroeconomics.+MIT+Press&ots=rVb25x2OV5&sig=OsvonYsWma8V_vmnyEqoxU7UrFk
Okeme, E. D., Gbarayorks, L. (2024). Exchange rate volatility and performance of international businesses in Nigeria: evidence from top 5 listed companies in the Nigerian stock exchange, Addaiyan Journal of Arts, Humanities and Social Sciences, 6(01), 36-52, DOI: 10.36099/ajahss.6.1.3.
Okwu, P. I., Nweke-Charles, U. E., Okeke, F., Chiamaka, E., & Emuobosa, O. J. (2025). Corporate Tax Planning Instrument and Financial Performance of Listed Consumer Goods Companies in Nigeria. Journal of the Management Sciences, 62(2), 377-397. https://journals.unizik.edu.ng/jfms/article/view/7304
Orisdare, M. A., Olofin, S. (2024). Exchange rate volatility and productivity in Nigeria: an Empirical analysis, Asian Journal of Economics, Business and Accounting, 24(6), 240-250, DOI: https://doi.org/10.9734/ajeba/2024/v24i61357.
Osabuohien, E., Obiekwe, E., Urhie, E., & Osabohien, R. (2018). Inflation Rate, Exchange Rate Volatility and Exchange Rate Pass-Through Nexus the Nigerian Experience. Journal of Applied Economic Sciences, 13(2). https://search.ebscohost.com/login.aspx?direct=true&profile=ehost&scope=site&authtype=crawler&jrnl=18436110&AN=135430410&h=URBPfdSDqnZYdGCphXDU8%2FlYj72QKOUIjfaR2EFrvnQbvcHfMGQADAROtjqYVdLHqOk3B6zw7I8qech7jg7iJQ%3D%3D&crl=c
Osho, A. E., & Efuntade, A. O. (2019). Effect of exchange rate fluctuation on the financial performance evaluation of multinational companies in Nigeria. Research Journal of Finance and Accounting, 10(16), 2222-2847. DOI: 10.7176/RJFA
Oweibo, O. C., & Sunday, M. A. (2024). Effect of Sectoral Foreign Exchange Utilization on Manufacturing Firms Performance in Nigeria. African Journal of Management and Business Research, 15(1), 377-394. https://doi.org/10.62154/pbmp3x83
Panasyuk, V., Kuzina, R., Moroz, J., Babich, I., Melnychuk, I., & Chyzhyshyn, O. (2020). Accounting of exchange rate differences on transactions with foreign currency loans. International Journal of Advanced Research in Engineering and Technology (IJARET), 11(5). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3628427
Saka, N. & Moyanga, D.T., (2023). Evaluating the Influence of Foreign Exchange Policy Regime on the Construction Sector in Nigeria. International Journal of Real Estate Studies, 17(1), pp.1-12. DOI: https://doi.org/10.11113/intrest.v17n1.233
Smriti, N. & Das, N., (2018). The impact of intellectual capital on firm performance: a study of Indian firms listed in COSPI. Journal of Intellectual Capital, 19(5), 935-964. https://doi.org/10.1108/JIC-11-2017-0156
Stren & Bland Partners (2024). Divestment & Exit of Multinational Companies in Nigeria: Implications and Recommendations. Retrieved from: https://strenandblan.com
Ta, V.D., Liu, C.M. & Tadesse, D.A., (2020). Portfolio optimization-based stock prediction using long-short term memory network in quantitative trading. Applied Sciences, 10(2), p.437. https://doi.org/10.3390/app10020437
Ukamaka, G. I. (2021). An Analytical Study on the Relationship between Financial Deepening and Economic Growth in Nigeria: 2007-2019 (Doctoral dissertation, University of Abuja (Nigeria). https://search.proquest.com/openview/847c80bad8c3d543a4e609c7a642b90e/1?pq-origsite=gscholar&cbl=2026366&diss=y
Uthman, A. B., & Salami, A. A. (2021). IFRS adoption and audit quality in Nigeria: the conditional effect of auditor industry specialization. Global Journal of Accounting, 7(2), 80-98. https://www.researchgate.net/profile/Abdulai-Salami-2/publication/361184234_IFRS_Adoption_and_Audit_Quality_in_Nigeria_The_Conditional_Effect_of_Auditor_Industry_Specialization/links/62a1c9626886635d5ccccbb7/IFRS-Adoption-and-Audit-Quality-in-Nigeria-The-Conditional-Effect-of-Auditor-Industry-Specialization.pdf
Xu, X., Weber, I. & Staples, M., (2019). Architecture for blockchain applications (pp. 1-307). Cham: Springer. https://link.springer.com/content/pdf/10.1007/978-3-030-03035-3.pdf
Zhou, C.K., (2022). Identifying the Impact of Exchange Rate Volatility on Corporate Credit Risk: Firm-level Evidence from China. Emerging Markets Finance and Trade, pp.1- 15. https://doi.org/10.1080/1540496X.2022.2072205
Descargas
Publicado
Cómo citar
Número
Sección
Licencia
I (we) submit this article which is original and unpublished, of my (our) own authorship, to the evaluation of the Veredas do Direito Journal, and agree that the related copyrights will become exclusive property of the Journal, being prohibited any partial or total copy in any other part or other printed or online communication vehicle dissociated from the Veredas do Direito Journal, without the necessary and prior authorization that should be requested in writing to Editor in Chief. I (we) also declare that there is no conflict of interest between the articles theme, the author (s) and enterprises, institutions or individuals.
I (we) recognize that the Veredas do Direito Journal is licensed under a CREATIVE COMMONS LICENSE.
Licença Creative Commons Attribution 3.0
