Study On The Application And Effect Of Derivative Instruments In Non-Ferrous Metal Industry Listed Companies

Since the 21st century,the globalization process of finance and economic has been accelerating.More and more Chinese enterprises have participated in the competition of international market.They have more development opportunities,but they also face many challenges.Nonferrous metals industry as a industry that is under the dual impact from virtual economy and the real economy,it may face more risks because of the fluctuations of commodity prices,raw material prices,interest rates and exchange rate,especially the raw materials and commodity prices are not only affected by the supply and demand,but also affected by the financial markets.I chooses the theme about the use of derivatives to explore and try to examine the factors that affect the use of derivative instruments in the listed companies of the nonferrous metals industry and the effectiveness that enterprises use derivative instruments for financial management,including the impact on performance fluctuations.This paper make an empirical research based on the relevant data of derivative instruments used in the non-ferrous metal industry listed companies during 2010-2015,and draws the following conclusions:1.During 2010-2015,there are 23 companies used derivative instruments to do some risk management in the nonferrous metals industry,accounting for 47.92%of the total number of companies,which is less than half.However,94%of the Fortune 500 companies clearly stated that they use derivative instruments to manage corporate risks in the 2009 International Exchange and Derivatives Association(ISDA)survey.It can be seen that derivative financial instruments have not been widely used in the listed companies of nonferrous metals industry in China.2.This paper further studies the impact of industry,equity nature and Managerial selfishness on the use of derivative instruments in non-ferrous metals industry.In logistic regression analysis,we find that whether the company use derivative instruments can be influenced by the industry,executive compensation,shareholding ratio of the chairman.3.I group nonferrous metal industry listed companies based on the frequency of using derivative instruments and found that the standard deviation of the company's remaining performance using derivative financial instruments every year was much smaller than that of companies that had not been used or had a useful life of less than three years after the t-test of the remaining performance.After doing a further independent sample t-test,it can be seen that there is a significant difference in the standard deviation between the two sets of residual performance.This result shows that the use of derivative instruments can reduce the company's residual performance fluctuations,further testing revealed that the use of derivative financial instruments could also improve the persistence of performance.Based on the research results of performance fluctuation and performance persistence,I reasonably deduces that the use of derivative instruments can enhance corporate value,the results of empirical tests show that this inference is correct.The innovation of this paper is that I choose the field of derivatives instruments to explore,in which area Chinese scholars rarely study.What's more,I choose the nonferrous metals industry which is under the dual impact from virtual economy and the real economy.This paper will add new content to the research of derivatives in our country.In addition,I add some new factors such as industry in the model when explore the factors that affect the use of derivative instruments in the listed companies of the nonferrous metals industry.I also add the factor of equity nature accounting for the situation in China.This makes the study in line with China's national conditions and have more local significance.Of course,there are some inadequacies in this article:First of all,since this study only selected a industry to explore,the sample size is small.It may impact the accuracy of the empirical study.Secondly,in the study of factors that affect the use of derivative financial instruments,there may be incomplete situations.For example,risk appetite is also one of the factors that affect the use of derivative instruments,but the risk appetite is difficult to measure,so the risk appetite is not taken into account.Thirdly,when study the relationship between the use of derivative instruments and the fluctuation of performance,I only reflects the risk of performance fluctuation,the source and performance of enterprise risk are diversified,and there are also a number of ways to measure corporate risk.It is not comprehensive if we only explore from the perspective of performance fluctuations.Finally,when I examines the use and effect of derivative instruments,I just studied whether the company used derivative financial instruments,but did not delve into the extent to which companies used derivative financial instruments,that is,whether the company was concerned with the use of derivative instruments but did not measure the amount of derivative instruments.It is possible that if the amount of derivative instruments used is different,corporate performance fluctuations and value will be different.If we can folly consider the impact of these factors on the company,the conclusion should be more reference.