The Effect of Financial Derivatives on the Financial Performance of Firms in the Financial Sector in Ghana

European Journal of Business and Management, Vol. 9, No. 34, 2017

7 Pages Posted: 5 Feb 2018

See all articles by John MacCarthy

John MacCarthy

University of Professional Studies, Accra

Date Written: December 31, 2017

Abstract

This paper provides evidence on the impact of financial derivatives on the performance of firms in the financial sector in Ghana. Secondary data on financial derivatives, controlled business risks and business performance in terms of return on investment are used for the period 2011-2015. Data are sourced from 23 randomly selected financial firms in Accra, Ghana. A quantitative research technique is used to test four hypotheses. A strong positive correlation between financial derivatives and controlled business risks is found, r (92) = .703, p < .05. Also, there is a strong positive correlation between financial derivatives and business performance in terms of ROI, r (92) = .961, p = .000. This means that the financial performance of businesses improves largely when they trade in financial derivatives. Financial derivatives significantly predict business performance at 5% significance level (t = 32.87, p = .000), where they account for 92.3% of the variation in business performance. Financial firms would, therefore, have to give priority to financial derivatives and their management to boost financial growth.

Keywords: Financial derivatives, business risks, financial firms, financial performance

JEL Classification: E58

Suggested Citation

MacCarthy, John, The Effect of Financial Derivatives on the Financial Performance of Firms in the Financial Sector in Ghana (December 31, 2017). European Journal of Business and Management, Vol. 9, No. 34, 2017. Available at SSRN: https://ssrn.com/abstract=3111329

John MacCarthy (Contact Author)

University of Professional Studies, Accra ( email )

Accra, 6302 Zug
Ghana

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