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Author: search.filters.author.Suprabha, K.R.Subject: search.filters.subject.Exchange rate exposure

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    Exchange Rate Exposure and Usage of Foreign Currency Derivatives by Indian Nonfinancial Firms
    (Springer Science and Business Media B.V., 2018) Prasad, K.; Suprabha, K.R.
    This paper investigates the usage of currency derivatives and its impact on the exchange rate exposure. A sample of 387 nonfinancial Indian firms listed in the National Stock Exchange of India were studied for a period of 5 years from 2011–2012 to 2015–2016. The currency derivatives data was collected from the annual reports of the sample firms, and the stock price data was collected from Ace Equity and Centre for Monitoring Indian Economy (CMIE) database Prowess. The results of the study indicate that the currency forward contract is the most preferred hedging instrument among the sample firms. The Indian firms showed the lower interest in exchange-traded instruments especially currency futures. This is in spite of the growth in the third-generation innovative and low-cost derivative instruments. This study also provided evidence that hedging using currency derivatives decreased the firms’ foreign exchange exposure level, while the use of foreign currency borrowing was found insignificant in decreasing the firm’s level of currency exposure. © 2018, Springer International Publishing AG.
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    Influence of financial distress on exchange rate exposure: Evidence from India
    (Inderscience Publishers, 2018) Prasad, K.; Suprabha, K.R.; Devji, S.
    This paper investigates the relationship between exchange rate exposure and level of financial distress. We argue that the exchange rate movements have a higher effect on the value of the firms with higher level of financial distress. The effect of other firm level variables such as profitability, size of the firm, foreign sales and expenses and liquidity on exchange rate exposure were also studied. We use Merton's (1974) structural default model to estimate firms' distance to default as a proxy for their probability of financial distress. A sample 387 firms listed in National Stock Exchange (NSE) is studied for a period of 2012-2016. We find that the level of firms' exchange rate exposure is significantly positively related to distance to default, indicating that firms that have a greater probability of financial distress are more affected by exchange rate movements. © © 2018 Inderscience Enterprises Ltd.