University of Canterbury Home
    • Admin
    UC Research Repository
    UC Library
    JavaScript is disabled for your browser. Some features of this site may not work without it.
    View Item 
    1. UC Home
    2. Library
    3. UC Research Repository
    4. UC Business School | Te Kura Umanga
    5. Business: Theses and Dissertations
    6. View Item
    1. UC Home
    2.  > 
    3. Library
    4.  > 
    5. UC Research Repository
    6.  > 
    7. UC Business School | Te Kura Umanga
    8.  > 
    9. Business: Theses and Dissertations
    10.  > 
    11. View Item

    Derivatives usage by New Zealand companies (2000)

    Thumbnail
    View/Open
    Chan_2000.pdf (8.155Mb)
    Type of Content
    Theses / Dissertations
    UC Permalink
    https://hdl.handle.net/10092/105009
    
    Thesis Discipline
    Accountancy
    Degree Name
    Master of Commerce
    Collections
    • Business: Theses and Dissertations [446]
    Authors
    Chan, Karen Sook Choo
    show all
    Abstract

    This study examines how derivatives are used by New Zealand companies. The analysis of risk characteristics of firms with and without derivatives show that, on average, firms with derivatives hedge firm-specific risks - users have lower standard deviations of equity returns and idiosyncratic risks. Their market risk, exchange rate exposure and interest rate exposure are not significantly higher or lower than those of non-users. Derivatives are also found to explain close to I 0% of the total variation in equity returns. However, the tests do not rule out possible speculative activities. The observation of motivations for derivatives usage by New Zealand companies indicate that the likelihood of firms using derivatives increases the higher the financial risk and the larger the firm size. The incentive for managerial self-utility maximisation is another reason. These findings are not completely consistent with optimal hedging theories. The departure of the results from that predicted by theory may be attributed to New Zealand's imputation taxation system. Under the classical taxation system, firms are hypothesised to hedge because of taxation, costs of financial distress, debt capacity, underinvestment problems, managerial risk-aversion, use of alternative hedging instruments and economies of scale in information and transaction costs. Under the imputation taxation system, firms are unlikely to have incentives to use derivatives to hedge because of taxation and debt capacity considerations nor will the decision to use derivatives be influenced by the use of alternative hedging instruments. But firms under imputation are still expected to use derivatives to hedge because of financial distress costs, managerial risk aversion and economies of scale in information and transaction costs. Underinvestment problem is likely to remain a motivator for derivatives usage under imputation, but results find no support for this.

    Keywords
    Derivative securities--New Zealand; Hedging (Finance); Risk management--New Zealand; Business enterprises--New Zealand--Finance
    Rights
    All Rights Reserved
    https://canterbury.libguides.com/rights/theses

    Related items

    Showing items related by title, author, creator and subject.

    • Risk Modeling and Management: An Overview 

      Chang, C-L.; Allen, D.E.; McAleer, M.; Amaral, T.P. (University of Canterbury. Department of Economics and Finance, 2013)
      The papers in this special issue of Mathematics and Computers in Simulation are substantially revised versions of the papers that were presented at the 2011 Madrid International Conference on “Risk Modeling and Management” ...
    • Psychological factors in investment choice between shares, bank deposits, and residential real estate in New Zealand, Hong Kong, and Germany 

      Kemp, S.; Chan, M.; Chen, Z.; Fetchenhauer, D.; Helton, W.S.; Steiniger, T. (University of Canterbury. Psychology, 2016)
    • Efficiency of Hedging Against Fluctuating Prices of Dairy Products 

      Koeman J; Bialkowski, Jedrzej (2015)
      This paper investigates hedging and cross-hedging internationally traded milk derivative products with internationally traded commodities, recently launched New Zealand dairy futures, New Zealand agricultural products, ...
    Advanced Search

    Browse

    All of the RepositoryCommunities & CollectionsBy Issue DateAuthorsTitlesSubjectsThesis DisciplineThis CollectionBy Issue DateAuthorsTitlesSubjectsThesis Discipline

    Statistics

    View Usage Statistics
    • SUBMISSIONS
    • Research Outputs
    • UC Theses
    • CONTACTS
    • Send Feedback
    • +64 3 369 3853
    • ucresearchrepository@canterbury.ac.nz
    • ABOUT
    • UC Research Repository Guide
    • Copyright and Disclaimer
    • SUBMISSIONS
    • Research Outputs
    • UC Theses
    • CONTACTS
    • Send Feedback
    • +64 3 369 3853
    • ucresearchrepository@canterbury.ac.nz
    • ABOUT
    • UC Research Repository Guide
    • Copyright and Disclaimer