What Kind Of Firms Use Derivatives?And How Do Derivatives Affect Firms' Performance?

Based on the research results of foreign and domestic scholars,and the theoretical basis of avoiding financial distress cost hypothesis,avoiding insufficient investment hypothesis,manager self-interest hypothesis and substitution effect hypothesis,and fully considering all possible influencing factors according to the particularity of Chinese market,this paper studies the motivation behind the use of derivatives by listed companies and the impact of using derivatives on firms5 performance.The innovation of this paper is to use the proportion of derivatives in the net assets and dummy variable at the same time to represent the indicators of derivative usage,and to add the substitution effect hypothesis and the actual controller attribute variables to the model for testing.This article manually searches for the"derivatives"keyword through the annual financial report of the company included in the Wind Financial Terminal,and screens out 48 Shanghai-Shenzhen A-shares that have held financial derivatives in 2013-2017 and whose operating net profit is within the normal range.The motivation behind the use of derivatives by listed companies is studied by regressing the proportion of derivatives in the net assets and dummy variavle through the explanatory variables derived from the theoretical basis.The regression results show that,assumptions cannot be verified well when we use dummy variable and logistic mode.When we use proportion of derivatives in net assets as dependent variable,the avoidance of financial distress cost hypothesis,under-investment hypothesis,manager self-interest hypothesis can be partially verified,and company size have no significant impact on the use of derivatives;substitution effect hypothesis,in particular,operational hedging(overseas operations and industry segments)and cash-debt proportion have effect on derivatives usage,and state-owned holdings have an inhibitory effect on derivatives use.This article builds 96 new samples based on the 1:1 pairing 48 sample firms to study the impact of using derivatives on firms' performance.Panel data regression results show that the use of derivatives has a positive impact on firmsJ performance,but excessive usage maybe have a negative on forms' performance.