Bahir Dar University Ethiopian Institute of Textile and

Fashion Technology

Title: Foreign exchange risk management practices by Jordanian

nonfinancial firms

WENDOSEN SEIFE

2nd Year MSc in Fashion Technology

ETHIOPIAN INSTITUTE OF TEXTILE AND FASHION

TECHNOLOGY

BAHIR DAR UNIVERSITY

YEAR 2020
 Foreign exchange risk management practices by Jordanian nonfinancial firms, Wendosen
Seife
Introduction
This article review helps to understand the whole article content and identify the strength and
weakness at each part of the article sequentially, which helps to give brief information about
the article to the reader. Therefore, the research was done in the field of economics
specifically contribute for understanding the concept of foreign exchange risk management
practices.
Main body
A. Description of the Study
The main purpose of the research is to investigate the relationship between foreign currency
risk and international business involvement, legal structure, firm size, sector, and
management practices in the Jordanian environment. The research was conducted to know
whether Jordanian corporations adopt or implement foreign exchange risk management
techniques or not, what kind of foreign exchange risk management do Jordanian corporations
mostly use and do firm-specific characteristics affect the level of adoption of foreign
exchange risk management techniques in the Jordanian environment or not. The study is
significant to study and identify factors that are presumed to affect the management of
foreign currency risk in developing countries.
B. Literature Evaluation
Most reviewed literatures for this study were not recent (i.e. between 1990 and 2004) and but
they relate directly to the research problem and objectives. But the author reviewed very few
literatures (i.e. only 12 articles) on the preface part of the study and problem statement.
C. Conceptual Framework
The author used a conceptual model. The model guides the research but it confuses the reader
that the model not clearly show the relationship between independent and dependent factors.
But the author stated some theory to elaborate and clear out the model.
D. Sample
A sample of the largest nonfinancial firms, in terms of annual sales and annual income,
operating in Jordan was used as a unit of analysis. The population of the study was sub-
grouped in terms of economic sectors into three strata (sub-groups), which are
 Foreign exchange risk management practices by Jordanian nonfinancial firms, Wendosen
Seife
manufacturing, commercial, and other sectors. The selection criteria weren’t specified. From
310 appropriate firms, 120 firms were selected: 45 manufacturing firms, 60 commercial
firms, and 15 firms from other sectors without any criteria. So, the sample was representative
since the author used stratified random sampling.
E. Method and Design
Primary source was a questionnaire written in Arabic using scales such as itemized rating
scales. In addition, category scales were used to identify specific characteristics of the
subject. The study design was appropriate and keep the procedure.
F. Analysis
The author used descriptive statistics to measure the central tendency and dispersion, such as
frequencies, ratios, means and standard deviations. He also used the Kruskal–Wallis one-way
analysis of variances (ANOVA) to examine the significance of statistical differences. This
technique compares the variances between groups with the variances within groups. Since,
One-way ANOVA is used to compare multiple groups (more than two) because it can control
the overall Type I error rate. The Cronbach’s alpha values for the items related to transaction
and economic risk were 0.90 and 0.72. it shows that the data is consistent. So, the selected
statistical tests were appropriate.
G. Results
The main finding of this study was testing the hypothesis and the results shows that; There is
no relationship between a firm size and the management practices toward transaction
exposure. The relationship between a firm’s different sectors and the hedging techniques
used was significant. Firm size negatively correlated to the management practices. This result
could be attributed to the fact that larger firms had less flexibility to act toward economic
exposure. The evidence also found a correlation between a firm’s sector and its management
practices: commercial firms had the strongest attitude toward managing economic exposure.
Moreover, a relationship between the legal structure of a firm and its management to
economic exposure was found to be significant. A firm’s degree of international involvement
and its management practices positively correlated. The author answers all the hypothesis by
analyzing the data gained from the questionnaires. The result of the study was presented in a
 Foreign exchange risk management practices by Jordanian nonfinancial firms, Wendosen
Seife
clear and understandable way using tables and theoretical description but the results gained
from this study not discussed with previous related works.
H. Subject matter significance
This article plays great role by giving information about foreign exchange risk which
becomes more important in light of the globalization and internationalization of world
markets, and is one of the most difficult and persistent problems with which the financial
executives must cope. The study focuses on transaction and economic exposures as the
dimensions of foreign exchange risk management techniques. As an additional question other
foreign exchange risk translation exposure is not addressed by this study but it is the main
risk with economic and transaction. As overall this study had good contribution for
researchers and for international business owners. The author finally recommended that
proper training programmes for financial managers in order to enhance their knowledge
about the importance of foreign currency risk and the different techniques used to manage
that risk was important part of the study.
Conclusion
The author concluded that, that there were no relationships between firm size and legal
structure and the management practices toward transaction exposure. A relationship between
a firm’s sector and international involvement with the management practices was found in
the transaction exposure dimension. Concerning the economic exposure dimension, a
relationship between all the characteristics and the managerial techniques was found.
Reference

1. Al-Momani, R. and Gharaibeh, M.R., 2008. Foreign exchange risk management

practices by Jordanian nonfinancial firms. Journal of Derivatives & Hedge
Funds, 14(3-4), pp.198-221.