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International Evidence on Financial Derivatives Usage

Author

Listed:
  • 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.

Suggested Citation

  • Sohnke M. Bartram & Gregory W. Brown & Frank R. Fehle, 2003. "International Evidence on Financial Derivatives Usage," Finance 0307003, EconWPA, revised 24 Jul 2003.
  • Handle: RePEc:wpa:wuwpfi:0307003 Note: Type of Document - PDF; prepared on IBM PC; pages: 69
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    References listed on IDEAS

    as
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    More about this item

    Keywords

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

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F3 - International Economics - - International Finance

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