Does derivative use have an impact on the level of firm risk? A case study of TaiwanTools Liu, Chia Chieh (2011) Does derivative use have an impact on the level of firm risk? A case study of Taiwan. [Dissertation (University of Nottingham only)] (Unpublished)
AbstractThe Purpose of this dissertation is to study the relationship between firm risk and derivative use. Do firms actually reduce risk by using derivative is the question this paper wants to answer. We analyze firm risk associated with derivatives adoption at first. Secondly, examine how risk effect relates to the level of financial derivatives usage for Taiwan non-financial firms. To accomplish this task, we examine 183 non-financial firms listed in Taiwan stock exchange market from 2005 to 2010. Meanwhile, delete data in 2008 to avoid result be affected by financial crisis. Our findings show using derivatives hedging or not do actually affect firm risk. However, comparing with non-derivatives users, derivative users tend to confront more firm risk. Furthermore, the extent of derivatives use also has impact on firm risk. This result consists with previous literature. High level derivatives users would reduce more firm risk. Hence, we conclude that the higher amount of derivatives firm employ for hedging, the more effective to reduce firm risk.
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