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A model for examining exchange rate shocks affecting on Financial Sustainability in export-oriented companies

Document Type : Original Article

Authors

1 Ph.D. Candidate, Department of Financial Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran

2 Assistant Professor, Department of Business Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran, fhanifi1351@gmail.com

3 Associate Professor, Department of Economics, Allameh Tabatabai University, Tehran,Iran

4 Associate Professor, Department of Business Management, Central Tehran Branch, Islamic Azad University, Tehran, Iran

Abstract

One of the variables affecting the behavior of enterprises is the exchange rate. Uncertainty about the amount of exchange rate volatillity for each firm is considered as a risk. The aim of this study is to explain a model to investigate the effect of exchange rate shocks on the financial sustainability of export-oriented companies. In this regard, the data on exchange rate, tax, oil revenue and export variables on financial sustainability was collected for 19 groups of companies from 2008 to 2019. To achieve the research goal, the Panel Vector Autoregressive Model (PANEL VAR) using the generalized method of moments (GMM) was used to analyzed the data. Then the results were interpreted using the Impulse Response Function and variance decomposition. The results of the IRF show that the effect of exchange rate volatility on the financial sustainability variable is initially negative, but has a positive effect over time and is neutralized after several periods. The same goes for an impulse equal to a standard deviation in tax. Also, the oil revenues and exports impulse have negative and positive effects on financial sustainability, respectively. According to the results of variance decomposition, it can be said that the effect of exchange rate on financial sustainability is greater than the effect of sustainability on exchange rate, because the exchange rate shocks have more explanatory power for sustainability fluctuations.

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References
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Petroleum Business Review
Volume 6, Issue 2 - Serial Number 18
April 2022
Pages 80-94
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History
  • Receive Date: 08 November 2021
  • Revise Date: 26 January 2022
  • Accept Date: 09 February 2022
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