International Journal of Academic Management Science Research (IJAMSR)   Year: 2022 | Volume: 6 | Issue: 7 | Page No.: 98-105 Investigating the Interaction of Exchange Rate and Firm Cash Flow Sensitivity in Nigeria Download PDF Ugwu, Ikechukwu Virginus Ph.D; Okeke, Prince Chinedu, Ph.D; Okoye, Nwamaka Jane Frances, Ph.D; Eboatu Ikenna Abstract: This study investigated the Interaction of Exchange Rate and Firm Cash Flow Sensitivity in Nigeria using selected firms in Nigeria Stock Exchange NSE. The dependent variable was Cashflow and the independent variable Exchange Rates was indicated by (Fixed Exchange Rates FER and Flexible Exchange Rate FLR), and a Control Variable (Interest Rates ITR). A purposive sampling method selected five services firms out of a population of fourteen (14) services firms listed on the floor of the NSE (2014-2020). Secondary data was collected from the published annual reports of the firms and was analyzed with Descriptive Statistics, Pearson Correlation and Panel Regression. The overall result shows that the R-squared and R-squared adjusted value are 59% and 57% respectively; this indicating that the independent and the control variable jointly explain the variations in the pooled firms' Cashflow Sensitivity. The specific findings show positive and statistically significant interaction of Fixed Exchange Rates FER and Interest Rates ITR on Firm Cash Flow CFL; while Flexible Exchange Rate FLR is positive and non-significant on CFL sensitivity of the pooled firms in Nigeria. Governments are advised to be careful on their exchange rate decisions, because these drives any economy either upwards or downwards and thus influences firms cash flow. The study contributes with the Model applied and the rich empirical literature for academia. The implications of our findings are that firm managers should scrutinize their decisions on foreign currency exchange as this influences Cashflow which is one of the measures used by investors in valuing company financial status.