The Effect of Foreign Currency Position on Firm Profitability: The Example of Borsa Istanbul

Abstract

With the effect of globalization, the rapprochement between countries in all areas of life has also facilitated the circulation of international capital. This convenience also enabled companies to access foreign resources. Thus, exchange rate risk and the management of this risk have become important for businesses that realize some of their financing needs in foreign currencies in open economies. In this study, which we have done based on this idea, the effect of exchange rate risk on the profitability financials of the companies through the foreign currency net positions in the company balance sheets has been examined. Firms in the BIST 100 (Borsa Istanbul 100) index were chosen as the sample of the study. The companies within the scope of the review are considered as financial, non-financial, non-exporting, exporting and all companies. The data set of 39 quarterly data for the period 2012:Q1-2021:Q3 constitutes the research. In the analyzes made, important findings were obtained between the FX net position and the firm's profitability.