TOTAL EXPOSURES TO СURRENCY RISKS OF UKRAINIAN PUBLIC AGRICULTURAL COMPANIES

Анотація

Introduction. The unpredictable volatility of foreign exchange rates is essential to economic agents' financial and economic performance, leading to currency risks. The most popular method of assessing currency risks is the application of asset pricing models, which define currency risk as the sensitivity (elasticity) of the market value of companies or their stock share returns to fluctuations in foreign exchange rates. This is called the total exposure of currency risks and is reflected by the corresponding coefficient of single-factor regression.

The purpose of the article is to investigate and assess the currency risks of Ukrainian agro-industrial companies based on the use of the conventional capital asset pricing model (CAPM) to fluctuations in the hryvnia to US dollar exchange rate and the trade-weighted index, and also, taking into account the peculiarities of the Ukrainian economy and its confident European integration movement, to identify the sensitivity of stock returns to the volatility of the hryvnia to the euro exchange rate.

Results. Considering the characteristics of the Ukrainian economy and its confident Eurointegration movement, besides the US dollar exchange rate, we study the sensitivity of stock returns to the volatility of the euro and the trade-weighted hryvnia index. The empirical base is data from 11 publicly traded agricultural companies listed on the Warsaw, London and Paris stock exchanges. We have found that most Ukrainian companies demonstrate a positive sensitivity to the decline in the hryvnia's value (growth of its exchange rate), confirmed by significant coefficients. It correlates with theoretical assumptions about improving export-oriented companies' competitiveness in the context of a national currency's devaluation. The exposure of the trade-weighted hryvnia index appeared slightly higher compared to the exposure to the US dollar, while the sensitivity to the euro, on the contrary, is noticeably lower. It creates the possibility for diversification of companies' risks.

Conclusions. Contrary to the majority of previous works of foreign scientists, this study does not reveal an anomaly of currency risk exposure – Ukrainian agricultural companies demonstrate statistically and economically significant sensitivity to exchange rate fluctuations. One can explain it by the sample and the highly open economy in general. The results identify the possibility for Ukrainian companies to obtain positive effects from hryvnia devaluation if effective management decisions are made.