The Effect of Derivatives Usage on Firm Value and Performance Essay

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Pages: 52

The Effect of Derivatives Usage on Firm Value and Performance:
The Study on Malaysian Publicly Listed Firms Between 2008 and 2012

An undergraduate thesis proposal
Presented to the Accountancy Department
De La Salle University
2401 Taft Avenue, Manila, Philippines

in partial completion of the course requirements of
Bachelor of Science in Accountancy

Camposagrado, Raphael Luis C. de Vera, Jan Neil P.
Garcia, Carlos Oliver G.

De La Salle University

August 2013

Table of Contents
CHAPTER 1 - THE RESEARCH PROBLEM 7 1.1 Background of the Study 7 1.2 Statement of the Problem 9 1.3 Objectives of the Study 9 1.4 Conceptual/Theoretical Framework 10 1.4.1 Rational Expectations Theory
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It then assesses the direct effects of derivatives, using a variety of indicators, on the companies’ firm value and performance. Thirty-one publicly listed Non-Bank Financial Institutions (NBFIs) from the Bursa Malaysia were included as a basis of assessing the reactions to derivatives usage.
Whether derivatives usage is value-adding or improves performance will be important in sealing in the fate of a derivatives market in the Philippines. If recent memory of the U.S. subprime mortgage crisis serves well, derivatives do not eliminate risk, they only replace it. The Philippines is in no position to decide whether the benefits of derivatives usage are large enough that it should choose to intertwine itself with the complex web of the global derivatives exchange without information such as those provided in this paper.
Therefore, taking all of this information into account, the researchers seek to determine the effects of the derivatives usage on the firm performance and value of NBFIs from Malaysia. Through it, different stakeholders such as firms, regulators and the academe will be able to determine the effectiveness of derivatives usage.

1.2 Statement of the Problem

How does the extent of derivatives usage affect firm value and financial performance? 1.3 Objectives of the Study
Derivative financial instruments are risk management tools that are also used for