Journal of Business & Financial Affairs

The Determinants of Currency Hedging in Indian IT Firms

Abstract

Raghavendra RH and Velmurugan PS

This paper explores the factors which determine the usage of currency derivatives by Indian IT companies. It has taken a total of 18 large IT firms in India. Those have disclosed the currency derivative data in their financial reports from 2011 to 2013; this study uses cross-sectional panel data and applies a multiple regression model. For this reason, the firm-specific features such as financial distress cost, underinvestment cost, multinationality, firm size, Taxation and Liquidity are regressed against the notional amount of currency derivatives reported for hedging activities. Finally result found that Size (Total assets) and Underinvestment (PE ratio) is the major determinant factors of the currency derivative usage in large Indian IT firms.