An Empirical Analysis on the Application of Financial Derivatives as a Hedging Strategy among Malaysian Firms

• Autorzy: Jaafar Pyeman , Shahsuzan Zakaria , Nor Asyiqeen Mohd Idris
• Języki publikacji: EN

Abstrakty

EN

Financial derivatives play an important role in helping companies manage the risk involved in interest rates, currency exchange rates, and equity markets. This study investigates the factors that influence derivative usage in Malaysian firms, as not much research has been conducted on the Malaysian market. Objectively, this study aims to determine the application of derivatives in Malaysian corporations by using a sample of 58 nonfinancial firms over the period 2011 to 2016. Relying on secondary data and focusing on a quantitative approach, the regression results conclude that the leverage, capital expenditure ratio and profitability factors are significant in the use of financial derivatives among Malaysian financial firms. This study provides some insights for policymakers to understand how derivatives can be used as off-balance-sheet risk management tools for Malaysian financial firms, thus minimizing these firms' risk exposure. (original abstract)

Słowa kluczowe

EN

Financial derivatives; Hedging; Risk management

PL

Finansowe instrumenty pochodne; Hedging; Zarządzanie ryzykiem

• Czasopismo: Contemporary Economics
• Rocznik: 2019
• Tom: 13
• Numer: nr 3
• Strony: 305--315

Twórcy

autor

Jaafar Pyeman

• Universiti Teknologi Mara, Malaysia

autor

Shahsuzan Zakaria

• Universiti Teknologi Mara, Malaysia

autor

Nor Asyiqeen Mohd Idris

• Universiti Teknologi Mara, Malaysia

Bibliografia

• Afza, T., & Alam, A. (2011). Corporate derivatives and foreign exchange risk management: A case study of non-financial firms of Pakistan. The Journal of Risk Finance, 12(5), 409-420. https://doi.org/10.1108/15265941111176145
• Ahmad, N., & Haris, B. (2012). Factors for Using Derivatives: Evidence From Malaysian Non- Financial Companies. Research Journal of Finance and Accounting, 3(9), 2222-2847.
• Ahmed, A. S., Kilic, E., & Lobo, G. J. (2006). Does recognition versus disclosure matter? Evidence from value-relevance of banks' recognized and disclosed derivative financial instruments. The Accounting Review, 81(3), 567-588.
• Alam, A., Afza, T., Bodla, M. A., & Lahore, C. (2013). Capital Market Imperfections and Equity Derivatives: A Case of Malaysian Non-Financial Firms. Middle-East Journal of Scientific Research, 17(1), 110-116. https://doi.org/10.5829/idosi.mejsr.2013.17.01.12153
• Alam, N., & Gupta, A. (2018). Does hedging enhance firm value in good and bad times. International Journal of Accounting & Information Management, 26(1), 132-152.
• Allayannis, G., & Ofek, E. (2001). Exchange rate exposure, hedging, and the use of foreign currency derivatives. Journal of international money and finance, 20(2), 273-296.
• Ali, K., & Kiran, A. (2017). Journal of Banking and Factors that Affect the Derivatives Usage of Non-Financial Listed Firms of Pakistan to Hedge Foreign Exchange Exposure. Journal of Banking and Financial Dynamics, 1(1), 9-20. https://doi.org/10.20448/journal.525/2017.1.1/525.1.9.20
• Ameer, R. (2010). Determinants of Corporate Hedging Practices in Malaysia. International Business Research, 3(2), 120-130. https://doi.org/10.5539/ibr.v3n2p120
• Aretz, K., Bartram, S. M., & Dufey, G. (2007). Why hedge? Rationales for corporate hedging and value implications. The Journal of Risk Finance, 8(5), 434-449.
• Bank of International Settlements. (2017). Statistical release: OTC derivatives statistics. Retrieved from https://www.bis.org/publ/otc_hy1711.pdf
• Barton, J. (2001). Does the use of financial derivatives affect earnings management decisions?. The Accounting Review, 76(1), 1-26.
• Bartram, S. M., Brown, G. W., & Fehle, F. R. (2009). International Evidence on Financial Derivatives Usage. Financial Management, 38(1), 185-206. https://doi.org/10.1111/j.1755-053X.2009.01033.x
• Berkman, H., & Bradbury, M. E. (1996). Empirical Evidence on the Corporate Use of Derivatives. Financial Management, 25(2). https://doi.org/10.2307/3665985
• Chincarini, L. B. (2007). The effectiveness of global currency hedging after the Asian crisis. Journal of Asset Management, 8(1), 34-51. https://doi.org/10.1057/palgrave.jam.2250059
• Choi, H., Leatham, D. J., & Sukcharoen, K. (2015). Oil price forecasting using crack spread futures and oil exchange traded funds. Contemporary Economics, 9(1), 29-44.
• Clark, E., & Mefteh, S. (2010). Foreign Currency Derivatives Use, Firm Value and the Effect of the Exposure Profile: Evidence from France. International Journal Of Business, 15(2), 183-196.
• Fok, R. C. W., Carroll, C., & Chiou, M. C. (1997). Determinants of corporate hedging and derivatives: A revisit. Journal of Economics and Business, 49(6), 569-585. https://doi.org/10.1016/S0148-6195(97)00040-4
• Gay, G. D., & Nam, J. (1998). The Underinvestment Problem and Corporate Derivatives Use. Financial Management, 27(4). https://doi.org/10.2307/3666413
• Geyer-Klingeberg, J., Hang, M., Rathgeber, A. W., Stöckl, S., & Walter, M. (2018). What do we really know about corporate hedging? A meta-analytical study. Business Research, 11(1), 1-31.
• Goldberg, S. R., Godwin, J. H., Kim, M. S., & Tritschler, C. A. (1998). On the determinants of corporate usage of financial derivatives. Journal of International Financial Management and Accounting, 9(2), 132-166. https://doi.org/10.1111/1467-646X.00034
• Haushalter, G. D. (2000). Financing policy, basis risk, and corporate hedging: Evidence from oil and gas producers. Journal of Finance, 55(1), 107-152. https://doi.org/10.1111/0022-1082.00202
• Howton, S. D., & Perfect, S. B. (1998). Currency and Interest-Rate Derivatives Use in US Firms. Financial Management, 27(4). https://doi.org/10.2307/3666417
• Kamarudin, F., Sufian, F., Nassir, A. M., Anwar N. A. M., & Hussain, H. I. (2019). Bank Efficiency in Malaysia a DEA Approach, Journal of Central Banking Theory and Practice, 8(1), 133-162.
• Lantara, I. W. N. (2012). The Use of Derivatives as a Risk Management Instrument: Evidence from Indonesian Non-Financial Firms. International Journal of Business and Economics, 11(1), 45-62.
• Nguyen, H., & Faff, R. (2002). On The Determinants of Derivative Usage by Australian Companies. Australian Journal of Management, 27(1), 1-24. https://doi.org/10.1177/031289620202700101
• Praveen Bhagawan, M., & Jijo Lukose, P. J. (2017). The determinants of currency derivatives usage among Indian non-financial firms: An empirical study. Studies in Economics and Finance, 34(3), 363-382.
• Schubert, S. F., & Broll, U. (2015). Consumption, inflation risk and dynamic hedging. Contemporary Economics, 9(2), 171-180.
• Shaari, N. A., Hasan, N. A., Palanimally, Y. R., Kumar, R., & Haji, M. (2013). The determinants of derivative usage : A study on Malaysian firms. Interdisciplinary Journal of Contemporary Research in Business, 5(2), 300-316.
• Shu, P. G., & Chen, H. C. (2003). The Determinants of Derivatives Use: Evidence from Non-Financial Firms in Taiwan. Review of Pacific Basin Financial Markets and Policies, 6(4), 473-500. https://doi.org/10.1142/S0219091503001171
• Singh, A., & Upneja, A. (2007). Extent of hedging in the US lodging industry. International Journal of Hospitality Management, 26(4), 764-776. https://doi.org/10.1016/j.ijhm.2006.07.004
• Smith, C. W., & Stulz, R. M. (1985). The Determinants of Firms' Hedging Policies. The Journal of Financial and Quantitative Analysis, 20(4), 391. https://doi.org/10.2307/2330757
• Tanha, H., & Dempsey, M. (2017). Derivatives Usage in Emerging Markets Following the GFC: Evidence from the GCC Countries. Emerging Markets Finance and Trade, 53(1), 170-179. https://doi.org/10.1080/1540496X.2016.1157467
• Venkatachalam, M. (1996). Value-relevance of banks' derivatives disclosures. Journal of Accounting and Economics, 22(1-3), 327-355.
• World Federation of Exchanges. (2017). WFE IOMA 2016 derivatives report. Retrieved from https://www.worldexchanges.org/storage/app/media/files/ioma_derivatives_market_survey/2016 IOMA Derivatives Market Survey.pdf

Identyfikatory

DOI

10.5709/ce.1897-9254.315