Investigating the effect of exchange rate fluctuations on the relationship between market power and firm performance

Low product substitution can lead to a less sensitive demand curve for business unit products and affect the business unit flexibility to overcome cost shocks. It is important to note that financial analysis uses product market power as an important factor in assessing a business unit's outlook. In particular, it has been stated that the only and most important decision in evaluating an economic activity is pricing power. Due to the devaluation of the domestic currency (exchange rate increase), net exports improved but the intensity of production costs also increased. Similarly, as the value of the domestic currency (exchange rate depreciation) improves, net exports fall and production costs fall. By examining the combination of the two channels of supply and demand, the result of exchange rate fluctuations on the country's economy can be determined. Therefore, the purpose of this study is to investigate whether exchange rate fluctuations have a significant effect on the relationship between market power and firm performance or not? The statistical population of companies listed on the Tehran Stock Exchange between 1392 and 1399 and using the information of 120 companies and multivariate linear regression method, the hypothesis was tested. The test results of the first hypothesis show that market power has a direct and significant relationship with company performance. Also, the results of the second hypothesis indicate that the interactive variable of exchange rate fluctuations * market power has a significant inverse relationship with firm performance.