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International Evidence on Financial Derivatives Usage

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  • Sohnke M. Bartram

    (Lancaster University)

  • Gregory W. Brown

    (University of North Carolina)

  • Frank R. Fehle

    (University of South Carolina)

Abstract

This paper presents international evidence on the use of financial derivatives for a sample of 7,292 non-financial firms from 48 countries including the United States. Across all countries, 59.8% of the firms use derivatives in general, while 43.6% use currency derivatives, 32.5% interest rate derivatives, and only 10.0% commodity price derivatives. Firmspecific factors associated with derivatives use are very similar across different countries. Some factors are associated only with specific types of derivatives. The size of the local derivatives market is an important factor determining derivatives use. Other countryspecific factors are not consistently significant. Together these results show that a wide range of factors likely determine the use of derivatives by non-financial firms thus explaining the mixed results from studies examining primarily U.S. firms. However, some of the results are unambiguously counter to theoretical predictions. Finally, we examine whether derivatives use is associated with higher firm value. We find positive valuation effects primarily for firms using interest rate derivatives.

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File URL: http://128.118.178.162/eps/fin/papers/0307/0307003.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0307003.

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Length: 69 pages
Date of creation: 08 Jul 2003
Date of revision: 24 Jul 2003
Handle: RePEc:wpa:wuwpfi:0307003

Note: Type of Document - PDF; prepared on IBM PC; pages: 69
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Web page: http://128.118.178.162

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Keywords: Derivatives; corporate finance; risk management; hedging; international finance;

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