Effects of Energy Commodity Price Risk on Firm Value -A Study of Select firms from Indian Power Sector

The energy commodity price volatility indicates a vital basis of risk to power sector business enterprises whose principal operations are subjected to direct exposure to thermal coal, crude oil and natural gas price fluctuations. Therefore, energy commodity price risk exploration has drawn considerable interest from academicians, investors, economist, financial analysts and risk management practitioners in recent years as it touches virtually every economic entity-from individuals, to organizations, to the economy. Hence, this paper empirically analyses the influence of energy commodity price risk on firm value of Indian power sector firms. The data has been sourced from PPAC of India, various AGM reports of sample firms, BSE database and analyzed using econometrics techniques with the help of EViews. GARCH analysis exhibits limited influence of energy commodity price risk on firm value of select sample firms. Effects of energy commodity price risk was not uniformly significant across the sample firm's firm value since their principal operations were directly or indirectly influenced by resource procurement practices, ownership pattern, operational diversification and other firm specific qualitative/quantitative factors. The observed outcome of this paper would be valuable to power sector stakeholders who needs to identify the effects of energy commodity price risk before strategizing their future course of activities to protect the top and bottom lines of their firms. Finally, the results are important to our country as power sector has been able to augment the growth of other allied sector dependent on energy.