S. M. R. K. Samarakoon, Rudra P. Pradhan, I. K. D. Gunathunga, Sasikanta Tripathy
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Financial Derivatives Usage and Firm Value in Turbulent Periods: Comparative Evidence from India during the COVID-19 Crisis
This study delves into the ramifications of financial derivatives usage on the firm value among Indian non-financial firms, covering both the COVID-19 crisis period (2020–2021) and the preceding stable phase (2015–2019). This comparative analysis aims to discern how the strategic use of derivatives influences firm valuation across varying economic conditions. Analyzing 712 firm-year observations during the pandemic and extending to 1735 observations in the pre-COVID era, our findings reveal that while foreign exchange and interest rate derivatives consistently enhance firm value, the use of commodity derivatives exhibits a complex relationship with firm value, becoming notably negative during the pandemic. This suggests that derivatives’ effectiveness in risk management and value preservation is contingent upon both the type of derivative and the economic context. Our research underscores the critical role of derivatives in navigating financial uncertainties, offering nuanced insights that enrich our understanding of firm-level risk management strategies in both stable and turbulent times.
期刊介绍:
The current remarkable growth in the Asia-Pacific financial markets is certain to continue. These markets are expected to play a further important role in the world capital markets for investment and risk management. In accordance with this development, Asia-Pacific Financial Markets (formerly Financial Engineering and the Japanese Markets), the official journal of the Japanese Association of Financial Econometrics and Engineering (JAFEE), is expected to provide an international forum for researchers and practitioners in academia, industry, and government, who engage in empirical and/or theoretical research into the financial markets. We invite submission of quality papers on all aspects of finance and financial engineering.
Here we interpret the term ''financial engineering'' broadly enough to cover such topics as financial time series, portfolio analysis, global asset allocation, trading strategy for investment, optimization methods, macro monetary economic analysis and pricing models for various financial assets including derivatives We stress that purely theoretical papers, as well as empirical studies that use Asia-Pacific market data, are welcome.
Officially cited as: Asia-Pac Financ Markets