Published Online:October 2024
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP141024
Author Name:Priyanka Mohanty and Dushyant Mahadik
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:321-335
The global community was rocked by the Covid-19 pandemic, and everyone had to deal with problems like unemployment, lockdowns and slowing economies. The impact of the pandemic on the efficacy of financial derivatives as hedge instruments utilized by businesses is the focus of this study. Understanding the precise impact of a crisis like this on a company’s value is beneficial to investors and businesses. It also enables them to better equip themselves for any future crisis of this nature and helps them modify their plans, procedures and guidelines for better risk management. The effectiveness of financial derivatives used as hedges by all Indian manufacturing companies listed on BSE and NSE has been examined in the study. Additionally, it attempts to test empirically the various factors influencing the use of derivatives. The entire period is divided into three phases: the pre-crisis phase (March 2016-March 2020), the Covid-19 crisis phase (April 2020- March 2021), and the post-crisis phase (March 2022-March 2023). The study also tests the model using 2SLS Regression analysis to verify robustness and check for endogeneity. The findings show that during noncrisis periods, hedgers who employed financial derivatives achieved a higher firm value than nonhedgers, but they did not earn profit during the crisis.
Companies now consider corporate risk management (CRM) as a crucial tool for identifying, controlling and optimizing risks. It has also led to the creation of a number of risk management strategies that could benefit the company. For the purpose of achieving risk management goals, financial derivatives are helpful