Abstract
The research work examined the effect of exchange rate fluctuation on performance evaluations of multinational companies in Nigeria. The objective of the study was to examine how foreign exchange affects financial performance of multinational companies in Nigeria. This Study is based on the transaction cost theory, liquidity theory, inflation theory and managerial theory of firm performance. Secondary data source was explored in presenting the facts of the situation. The secondary data were obtained from relevant literatures, Central Bank of Nigeria Statistical Bulletin and annual report of selected multinational companies in Nigeria. Data were tested using the Ordinary Least Square Linear Regression model. Findings show that exchange rate fluctuation has significant effect on performance of multinational companies in Nigeria. As a result, the study concluded that exchange rate instability affects the operations of companies in Nigeria vis-à-vis international trade with other countries of the world. It was recommended that, Multinational Companies should develop a robust foreign exchange risk management framework which will clearly show its currency risk assessment procedures and implementation of foreign exchange risk management strategy. These strategies should be monitored and adjusted regularly. Keywords: Exchange rate, Financial Performance, Inflation rate, Interest rate, Multinationals companies, Return on Assets. DOI : 10.7176/RJFA/10-16-03 Publication date : August 31 st 2019
Highlights
The foreign exchange market is characterized by instability and uncertainty which makes prediction of future prices challenging
The results reveal that the Sudanese economy exhibited an exchange rate overvaluation over the period under consideration
In order to investigate the effect of exchange rate fluctuation on performance evaluations of multinationals in Nigeria, information from Central Bank of Nigeria Statistical Bulletin and annual reports of Dangote Group Plc concerning return on assets, exchange rate, inflation rate and interest rate covering the period of years 2001- 2018 (18years) was used
Summary
The foreign exchange market is characterized by instability and uncertainty which makes prediction of future prices challenging. These fluctuations pose a threat to importer and exporters engaged in various international businesses as they are naturally exposed to currency risks (Allayannis & Weston, 2011). In an international trade which involves different currencies, the inconsistency of foreign exchange rates is a potentially interesting factor that drives the level of performance of manufacturing companies as it affects their financial intermediation process (Danish, 2012). The continuing increases in the world trade and capital fluctuations have made the exchange rates as one of the main determinants of business profitability and equity prices (Bradley & Moles, 2002)
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