Author : Subhamoy Chatterjee
published in : Emarald insight
The study analyses the use of interest rate derivatives, particularly interest rate swaps, among Indian mid-cap corporates to understand differences between users and non-users. It highlights that increasing exposure to foreign currency borrowings and volatile interest rates necessitate structured hedging strategies, especially for mid-sized firms with limited resources. Using financial statement data of 225 BSE-listed companies (2006–2009), the study applies univariate and multivariate analysis to examine determinants such as size, growth, debt, and current liabilities.
Findings indicate that swap users are significantly larger and exhibit greater information asymmetry, supporting its role as a key driver of derivative usage. Evidence on agency costs is mixed, while comparative advantage shows limited relevance due to data constraints. Overall, the study establishes that interest rate swap adoption is linked to firm-specific financial characteristics and provides a practical framework to guide corporate risk management and hedging decisions in the Indian context.
