Foreign Exchange Rate Exposure and Its Determinants on Performance of Manufacturing Firms in Turkey

The study investigates foreign exchange rate risk exposure of 37 manufacturing firms traded in Istanbul Stock Exchange in Turkey during the period of 2005-2014 by using Jorion (1990) regression model. Unlike previous studies, the relationship has been conducted by regressing ratio of return on capital employed instead of stock returns of firms against both contemporaneous and lagged exchange-rate changes. The findings show that analyzed firms exposed to exchange-rate fluctuations can be explained by the level of its export ratio and size of assets. The firms with high level of export ratio and large size of assets tend to have less exposure. The evidence also indicates that age of firm is not determining factor for exchange exposure