The Impact of Company Characteristics on Derivatives Usage: Survey Study of Large Croatian Companies

Abstract

The use of derivatives for risk management purposes has been a worldwide phenomenon for several decades. Researches show that use of derivatives as a tool of corporate risk management can contribute to the creation of company’s market value and shareholder wealth. Studies on companies’ motives for derivatives usage and non-usage were conducted in USA, Canada, Australia, United Kingdom, Belgium, Sweden, Taiwan and Pakistan. In the recent years, the subject of derivatives markets has been abundantly covered in Croatian literature as well. At the moment, there is no derivatives market in Croatia, and only viable exchange trading is spot trading of securities on the Zagreb Stock Exchange. However, those interested can trade at major European and world exchanges through mediation of domestic and foreign brokers. For this reason, the attitude of Croatian companies towards derivatives trading imposed as insufficiently studied area of research. For the purpose of this paper a primary research was conducted among large Croatian companies. The purpose of the research was to determine the extent to which large Croatian companies are familiar with the concept and strategies of derivatives trading, how many companies use derivatives, the type of most commonly used derivatives and motives for use and non-use of derivatives among Croatian companies. The analysis of survey results was conducted through cross-tabulation in order to assess the impact of company characteristics on derivatives usage.

DOI: 10.5901/mjss.2013.v4n10p59