Journal ArticlesThis collection consists of published and nonpublished articles of IIMK Community.http://dspace.iimk.ac.in:80/xmlui/handle/2259/3822024-03-28T20:54:02Z2024-03-28T20:54:02ZThe determinants of currency derivatives usage among Indian non-financial firms: An empirical studyPraveen Bhagawan, M.Jijo Lukose, P.J.http://dspace.iimk.ac.in:80/xmlui/handle/2259/10022020-12-08T17:23:42Z2016-05-12T00:00:00ZThe determinants of currency derivatives usage among Indian non-financial firms: An empirical study
Praveen Bhagawan, M.; Jijo Lukose, P.J.
Purpose – Theoretical studies suggest that hedging helps firms to reduce their financial distress costs and under investment problem especially if the markets are imperfect. Hence hedging, through the use of currency derivatives, is one of the important financial policies for firms. The purpose of this paper is to empirically examine the determinants of derivatives usage by Indian firms using financial disclosures on currency derivatives by non-financial constituents of S&P CNX 500 for 2009. Design/methodology/approach – We manually collect the data on foreign currency derivatives from firms’ annual reports for 2009 and then follow Haushalter’s (2000) approach to examine the determinants of
firms’ decision to hedge. A firm can make its hedging decision at once, deciding whether to hedge and how much to hedge. Given the nature of dependent variable that is censored, it is appropriate to use Tobit regression. A firm can also decide its hedging decision in two steps by deciding first on whether to hedge and later how much to hedge. The former is modelled by probit regression and later by conditional regression.
Findings – Our empirical evidence suggests that forwards are the main instruments for managing currency risk followed by options and swaps. The objectives, in the order of priority, are reduction in exposure associated with foreign currency receivables, foreign currency long-term loans and foreign currency payables. Firm’s decision to hedge is positively related to size, foreign exchange exposure and leverage, while negatively
related to liquidity and investment opportunities. We find evidence of higher derivative usage by firms with both higher currency risk and higher financial distress costs.
Practical implications – The findings of this paper will help corporates, researchers and regulators to understand firms’ motives behind hedging. Originality/value – This is the first empirical study that examines the determinants of firm’s decision to hedge and the extent of hedging in the context of emerging economies like India.
Studies in Economics and Finance, Vol. 34
Issue: 3, pp.363-382, https://doi.org/10.1108/SEF-09-2014-0172
Permanent link to this document:
https://doi.org/10.1108/SEF-09-2014-0172
2016-05-12T00:00:00ZDynamic Linkages between Gold and Equity Prices: Evidence from Indian Financial Services and Information Technology CompaniesShubhasis, DeyAravind, Sampathhttp://dspace.iimk.ac.in:80/xmlui/handle/2259/9432020-12-08T17:23:15Z2017-03-01T00:00:00ZDynamic Linkages between Gold and Equity Prices: Evidence from Indian Financial Services and Information Technology Companies
Shubhasis, Dey; Aravind, Sampath
In this paper, we use multivariate GARCH models to analyze dynamic linkages between gold and equity price returns. We model dynamic conditional correlations and volatility spillovers between these assets. Our results indicate that spot gold can be an effective hedge against stock prices. A $1 long position in the NIFTY Financial Services index can be hedged for 12 cents with a short position in spot gold and a $1 long position in the NIFTY Information Technology index can be hedged for 5 cents with a short position in spot gold. Gold also seems to act as a safe haven asset during the Global Financial Crisis period between 2007 and 2009. Our results suggest that crisis or not a prudent investor should allocate around 30 per cent of her investible assets in gold within a gold/stock portfolio. Given that in India around 41% of the population is still without access to banking services and are hence deprived of interest-earning deposits, it is not very surprising to find gold’s optimal portfolio weight to be as high as 30 per cent.
* Shubhasis Dey is an Associate Professor in Economics at the Indian Institute of Management Kozhikode, Kozhikode, India. IIMK Campus P.O., Kozhikode, Kerala 673570, India; Email: s.dey@iimk.ac.in; Phone Number (+91) 4952809115.
Aravind Sampath is an Assistant Professor in Finance at the Indian Institute of Management Kozhikode, Kozhikode, India. IIMK Campus P.O., Kozhikode, Kerala 673570, India; Email: aravinds@iimk.ac.in Phone Number (+91) 4952809232.
2017-03-01T00:00:00ZShort and Long-run Performance of Bookbuilt IPOs in IndiaKumar, S.S.S.http://dspace.iimk.ac.in:80/xmlui/handle/2259/3932020-12-08T17:20:03Z2007-12-01T00:00:00ZShort and Long-run Performance of Bookbuilt IPOs in India
Kumar, S.S.S.
One of the important reforms Indian markets witnessed in the recent past is the introduction of issuing sharesthrough the book building process which aims at efficient price discovery. The paper attempts to see how theIPOs issued through book building process fare both in short-run as well as in long run. Results indicate that theIPOs are under-priced as is evidenced by the positive listing day returns and are out performing the market inthe subsequent months almost up to twenty four months. However, after two years of listing they generatenegative returns. This finding is consistent with the /PO performance literature from the other countries butis incontrast with the first long run study on 1POs in the long run in India.
International Journal of Management Practices & Contemporary Thoughts, Volume 2, No.2, July-December 2007, Pages 20-29
2007-12-01T00:00:00ZRole of Institutional Investors in Indian Stock MarketKumar, S.S.S.http://dspace.iimk.ac.in:80/xmlui/handle/2259/3922020-12-08T17:20:37Z2007-01-01T00:00:00ZRole of Institutional Investors in Indian Stock Market
Kumar, S.S.S.
An important feature of the development of stock market in India in the last 15 years has been the growing participation of Institutional Investors, both foreign institutional investors and the Indian mutual funds combined together, the total assets under their management amounts to almost 18% of the entire market capitalization. This paper examines the role of these investors in Indian stock markets and finds that the market movement can be explained using the direction of the funds flow from these investors.
2007-01-01T00:00:00Z