Foreign exchange exposure and multinationality of Indian firms

The research paper examines the relationship between the foreign exchange exposure of the S&P BSE500 companies and the extent of their multinationality. The level of multinationality and extent of foreign exchange exposure measured individually for 357 constituent firms depending on the availability of data. Foreign earnings to total earnings ratio measured multinationality, while a two factor regression coefficient with share price returns as a dependent variable and USD/INR rate as independent variable and S&P 500 index returns as a control variable. Annual Financial data and monthly market data for all constituent companies from January 2007 to December 2015 (9 years) was collected from Prowess database, BSE and RBI website. The results provides no conclusive evidence on a strong relationship between the variables and also there was no causal relationship established using Granger Causality Test.