Financial Derivatives Usage and Firm Value in Turbulent Periods: Comparative Evidence from India during the COVID-19 Crisis

S. M. R. K. Samarakoon (), Rudra P. Pradhan (), I. K. D. Gunathunga () and Sasikanta Tripathy ()
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S. M. R. K. Samarakoon: Indian Institute of Technology Kharagpur
Rudra P. Pradhan: Indian Institute of Technology Kharagpur
I. K. D. Gunathunga: Wayamba University of Sri Lanka
Sasikanta Tripathy: University of Bahrain

Asia-Pacific Financial Markets, 2025, vol. 32, issue 2, No 3, 445 pages

Abstract: Abstract 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.

Keywords: Derivatives market; Foreign currency derivatives; Commodity derivatives; Interest rate derivatives; Firm value; India; Turbulent Periods (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10690-024-09457-8

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