Evaluation of Foreign Exchange Risk Management Practices A Study of Star Export Houses

Abstract

One of the most difficult and unrelenting problems in the era of globalisation is exchange rate newlinevolatility. Also, predicting movements in exchange rate is much more difficult than preparing newlineitself for the adverse fluctuations in exchange rate. Exporters who have the capacity to generate newlinevolatility in the economy gets adversely affected by the extreme fluctuations in exchange rate both newlinein terms of competitiveness and earnings recently. However, it is not only large and multinational newlinecompanies have been facing the issue of fluctuations in exchange rate but also small export houses newlineface this problem as they have lack of market intelligence, lack of resources in terms of skill and newlinefinance for handling currency risk. Majority of export houses perceive that the foreign exchange newlinemanagement is too complex or too demanding a task and based on this perception some export newlinehouses have decided that managing this risk isn t cost effective. newlineAgainst this background, the main objective of the study is to describe the foreign exchange risk newlinemanagement practices of export houses. In particular, the study aims to describe the certain newlineaspects of foreign exchange risk management practices of export houses which further go by newlineassessing the potential association among firm s specific characteristics and foreign exchange risk newlinemanagement variables. Furthermore, an effort has been made to study the long run and short run newlinerelationships among exchange rate volatility and its determinants using ARDL model. newlineIn accordance with the objectives both primary data as well as secondary data were obtained and newlinehave been processed and analysed through descriptive statistics such as frequency tables, cross newlinetabulation, Chi-square test, Cramer s V statistic, Contingency coefficient and Co-integration newlineAnalysis. newlineThe first part of analysis concerns with the practices of export houses on foreign exchange risk newlinemanagement. The analyses of foreign exchange risk management are divided into three stages, newlineidentification of foreign exchange exposure, adoption of polic