Are Values of Malaysian Companies Affected By Foreign Exchange Rate Changes?

Abstract

This studies the foreign exchange risk of Malaysian firms traded on the Kuala Lumpur Stock (KLSE). It aims to understand whether there exists any relationship between foreign exchange and firm value as well as whether firm value was influenced by lagged exchange rate. closing prices ofthe stocks on the KLSE from 1990 to 1996 were used. The selection of firms on the reporting of foreign exchange gains/losses on the profit and loss account as well as in the foreign exchange reserves in the balance sheet. found that 19.5% of firms’ values were significantly exposed to foreign exchange risk lading to that the results did not indicate that foreign exchange risk is a significant factor in ing firm value. Lagged exchange rate changes were also found to be inconclusive in the ion of firm value.