Management of Forex Risk Exposure and Determinants of Forex Hedging strategies A Study of SMEs and Unlisted Non Financial Firms in india

Abstract

The volatility in foreign exchange risk is influenced by change in economic newlineperformance of various economies in terms of their GDP, inflation rate, fiscal deficit, newlineemployment rate, position in world trade etc. The business firms having international newlineoperations are directly affected by change in currency exchange rate. The currency newlinerisk or Forex risk is understood as possible loss to payment of international newlinetransactions due to unfavorable exchange rates. Ideally, companies of all sizes (small, newlinemedium and big) are equally affected by Forex rate fluctuations. But there is newlinediversity in this opinion too. Likewise, Yeo and Lai (2004) stated in their research newlinethat SMEs having international exposure are more exposed to foreign exchange risk newlinein comparison to large sized firms. While Doidge, Griffin, and Williamson (2002) newlineargued that the Forex risk exposure of SMEs is less in comparison to large firms. The newlineForex risk exposure may vary from country to country and also vary for specific types newlineof firms, i.e., small, medium and large. newline newline