On the Determinants of Corporate Usage of Financial Derivatives

35 Pages Posted: 15 Apr 2014

See all articles by Stephen R. Goldberg

Stephen R. Goldberg

Grand Valley State University

Joseph H. Godwin

Grand Valley State University - Department of Accounting & Taxation

Myung‐Sun Kim

Rutgers, The State University of New Jersey - New Brunswick/Piscataway

Charles A. Tritschler

Purdue University

Date Written: June 1998

Abstract

We analyze firm characteristics associated with adoption and then level of financial derivatives usage for U.S. non‐financial firms. Interest‐rate derivatives are disaggregated from foreign‐exchange derivatives. The analysis provides initial evidence on determinants of the level of derivatives usage. We find differences between characteristics of adopters and characteristics influencing level of derivative activity. We also find differences between characteristics of interest‐rate and foreign‐exchange derivatives users. Level of both interest‐rate and foreign‐exchange derivatives usage is positively associated with multinationality, variance of accounting return on assets, and growth opportunities (proxied by research and development expenditures), and size. Interest‐rate derivatives usage is also positively associated with debt levels. The findings on the adoption decision generally confirm other research. Our findings are consistent with extant theories.

Suggested Citation

Goldberg, Stephen R. and Godwin, Joseph H. and Kim, Myung‐Sun and Tritschler, Charles A., On the Determinants of Corporate Usage of Financial Derivatives (June 1998). Journal of International Financial Management & Accounting, Vol. 9, Issue 2, pp. 132-166, 1998, Available at SSRN: https://ssrn.com/abstract=2425005 or http://dx.doi.org/10.1111/1467-646X.00034

Stephen R. Goldberg (Contact Author)

Grand Valley State University ( email )

1 Campus Dr.
Allendale, MI 49401-9403
United States

Joseph H. Godwin

Grand Valley State University - Department of Accounting & Taxation ( email )

Seidman School of Business
1 Campus Drive
Allendale, MI 49401
United States

Myung‐Sun Kim

Rutgers, The State University of New Jersey - New Brunswick/Piscataway

94 Rockafeller Road
New Brunswick, NJ 08901
United States

Charles A. Tritschler

Purdue University

610 Purdue Mall
West Lafayette, IN 47907
United States

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