Final Year Project

Date : Aug 2017 - May 2018

The developing and emerging economies like Pakistan have faced difficulties in achieving the right kind of the policy setup regarding the exchange rate exposure. Under developing countries are also facing problems in appointing appropriate board structure according to firm size and operations. So our research objective is to find the effect of board size, financial literacy, independent directors and board ownership structure on exchange rate exposure in export oriented textile industries operating in Pakistan. We investigates the relationship between exchange rate exposure which is our dependent variable with our independent variables i.e. proxies of board structure such as board size, board ownership, financial literacy and independent directors. Board Structure including board of directors plays the most important role in decision making and maintaining an effective organization. They also helps in minimizing the effect of exchange rate exposure which refers to the risk associated with the foreign exchange rates that change frequently and can have an adverse effect on the financial value of a firm. The scope of this study is limited to textile-export companies established in Pakistan, whose export sales are more than their local sales. We took daily stock prices of companies from PSX and cross matched it with dollar exchange rate from 2016-2017, by using two factor model and ARDL method. We have found exchange rate exposure is negatively associated with financial literacy, board ownership. Whereas, independent directors are negatively correlated but there relationship is partially significant. We also found positive but insignificant correlation among board size and exchange rate exposure. Results support our hypothesis on that basis we recommend some policies that are employment of board members with share-holding percentage, more independent directors and qualified board in company’s Board. This will helps in minimizing exchange rate exposure.