Title: The empirical relationship between the value of rupee and performance of information technology firms: evidence from India
Authors: Sudharshan Reddy Paramati; Rakesh Gupta; Suneel Maheshwari; Vinu Nagar
Addresses: Department of Accounting, Finance and Economics, Griffith Business School, Griffith University, Brisbane, Queensland-4111, Australia ' Department of Accounting, Finance and Economics, Griffith Business School, Griffith University, Brisbane, Queensland-4111, Australia ' Department of Accounting, Eberly College of Business and Information Technology, Indiana University of Pennsylvania, Indiana, PA 15705, USA ' Swinburne University of Technology, P.O. Box 218, Mail 25, Cnr John and Wakefield Streets, Hawthorn, VIC 3122, Australia
Abstract: This study investigates the dynamic linkages between exchange rates of Indian Rupee-US Dollar and stock prices of four Indian information technology (IT) companies. The study utilises daily data of closing stock prices of IT companies and exchange rates for the period of August 2004 to September 2013. Empirical results of AGDCC GARCH model suggest that correlations are time-varying and are largely negatively associated over time. This indicates that there is an inverse relationship between the movements of exchange rates and the performance of IT companies. Further, co integration test results show no significant long-run equilibrium relationship between exchange rates and stock prices of IT companies. Finally, Granger non-causality test results reveal that the null hypothesis of IT companies does not Granger cause exchange rates is strongly rejected at 5% significance level and no evidence of reverse causality is found. These findings suggest that exchange rates do not drive the performance of IT companies in India.
Keywords: exchange rates; IT industry; firm performance; AGDCC-GARCH model; information technology; rupee value; India; stock prices.
International Journal of Business and Globalisation, 2016 Vol.16 No.4, pp.512 - 529
Received: 07 Mar 2015
Accepted: 25 Apr 2015
Published online: 01 Jun 2016 *