Unraveling the truth behind the highs and lows: An analysis on the effect of foreign exchange rate volatility on the profitability of the various firms in selected industries from the Philippines

• Main Authors: Antonio, Pamela Rosiel D., Dy, Alecca Samatha Grace C., Gonzalez, Judy Ann A., Sioson, Christian Adrian A.
• Format: text
• Language: English
• Published: Animo Repository 2017
• Subjects: Foreign exchange rates > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/7758
• Institution: De La Salle University

This undergraduate thesis would like to determine what measures of profitability such as return on equity, return on assets and stock returns would be affected by the foreign exchange rate volatility. The study used a 10-year time horizon which is from 2007-2016. The researchers used descriptive statistics to measure the volatility of foreign exchange rate. Moreover, to determine the relationship of foreign exchange rate volatility to return on equity, return on assets and stock returns, the researchers utilized data panel. Hausman test was also conducted in the research in order to figure out which model should be considered between the random and fixed effects. The findings showed that industries such as finance, mining/energy utilities and holding firms are more affected by the foreign exchange rate volatility as they have at least two variables that turned out to be either positively and negatively significant. Upon examination and analysis, the researchers have discovered that majority of the companies' stock returns have a negatively insignificant result with foreign exchange volatility. On the other hand, few industries, such as telecommunications, transportation and logistics, tourism, leisure and gaming, displayed insignificant effect and experienced little to no significant effect at all. Upon completion of the study, the researchers would like to recommend the use of longer time horizon and the inclusion of more industries and firms in order to improve the study.