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Volume 29 Number 2 December 2004
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Management Motivation for Using Financial Derivatives in Australia |
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Karen Benson Barry Oliver
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Abstract |
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This study takes a direct approach to determine management motivation for the use of
financial derivatives. We survey a sample of Australian firms on attitudes to
derivative use and financial risk management. Management views are sought on the
importance of a series of theoretical reasons for using derivatives. Generally, we find
that managers are focused on the broad reduction of risk and volatility of cash flows
and earnings in using derivatives. Specific issues such as reducing bankruptcy costs,
debt levels and taxation are not considered as important. A further interesting result
from this research is that even though firms may use derivatives they may not
necessarily hedge all of their annual exposures across different financial risks. This
helps explain the inconsistency of results in many empirical studies on the
determinants of derivative use.
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Download this article.
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Keywords |
| DERIVATIVES; RISK MANAGEMENT; HEDGING; FINANCIAL RISK. |
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Contact DetailsKaren BensonUQ Business School, University of Queensland, QLD 4072.
Barry Oliver
School of Finance and Applied Statistics,
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