Invitation for a seminar on 15th December, 2011

[RAJESH DESAI]

 

24, Kothari Road, Nungambakkam, Chennai 600 034                   Date 15th December, 2011   Time 3.00 pm Venue Kerala Conference Room 10th Floor, Phase 1 IIT Madras Research park, No.1 Kanagam, Chennai-600113.

INSTITUTE FOR FINANCIAL MANAGEMENT AND RESEARCH (IFMR) cordially invites you for a seminar on    "Corporate Use of Currency Derivatives: An Empirical Study of Non-financial Firms." by Mr. Praveen Bhagawan.  M. IFMR Abstract   .    Since the last decade, Indian firms have been using substantial amount of foreign currency derivatives to hedge their foreign currency risk. We examine the usage of currency derivatives by non-financial constituents of S&P CNX 500 for the year 2009.  Among firms with disclosure on currency derivatives, 84.09% of the sample firms go for hedging and the remaining 15.91% of the sample firms do not hedge their foreign exchange exposure. Out of classified hedgers, 18.97% of the sample firms prefer complete hedging and the remaining 81.03% of the sample firms go for selective hedging. We find that for managing currency risk, forwards and futures are the main instrument followed by options and swaps.  We observe that corporates use currency derivatives to hedge mainly for receivables followed by long term loans and payables. We examine what determines a firm’s decision to hedge, extent of hedging and also extent of hedging among hedgers. The probability of hedging is positively related to foreign exchange exposure and leverage ratio; and negatively to liquidity and investment opportunities. The extent of hedging is negatively related to liquidity, profitability and investment opportunities; and positively related to foreign exchange exposure. Our result supports financial distress cost hypothesis.

 

--
CA. Rajesh Desai