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The Effect of Exchange Rate Risk on Company Value and Earnings

Abstract

In this study, a multinational company, Unilever is selected and the trends in some company specific variables identified and subsequently regressed in the form of exchange rate risk effect on value and earnings. The dataset spans the period from 2004 to 2013.  The earnings quality of Unilever Ghana Limited shows a joint significance impact from all the interactions of the variables that were observed under the course of this study. In that same regard, with the exception for the GB Pound which exhibited a negatively significant impact, all the other exchange rate risk exposures indicated a positive relationship on company earnings, although they were not significant. The intuitive explanation that could be adduced for the result reported, was the fact that, trading activities on the stock exchange remains constant for a long time, hence changes in the key exchange rate risk exposures having a significant toll on the earnings quality of the company.

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