Factors that Affect the Derivatives Usage of Non-Financial Listed Firms of Pakistan to Hedge Foreign Exchange Exposure

Abstract

This study aims to investigate the factors that affect the derivatives usage of non-financial listed firms of Pakistan to hedge foreign exchange exposure by using data of 51 non-financial firms listed on Pakistan stock exchange from 2010-2013. The dependent variable was derivative usage which was used as dummy since no financial information was disclosed in company annual reports but the decision of usage or not. Non-parametric tests were uses which is univariate analysis to calculate the mean difference between users and non-users of derivative usage for hedging purposes. Further, logistic regression model was used to analyze the impact of financial distress costs, tax convexity, underinvestment problem, profitability, managerial holdings of the company and foreign sales on firm's decision to whether they use FX derivatives for hedging purposes or not. The result shows that financially distressed firms, having lower managerial holdings and lower interest coverage ration with high foreign sales are using FX derivatives in Pakistan.

A Proposed Measurement Instruments for Total Quality Management Practices in Higher Education Institutions

“…TQM implementation awareness level has increased considerably over the past few years. TQM in education have been discussed in many platforms and consider as a priority issue today for research and analysis (Khan, et al, 2016;Psomas & Antony, 2017). In order to understanding the conceptualization, assessment and measurement of quality in education, a number of studies are being conducted.…”

Impact of Credit Risk Transfer Techniques on Lending Behavior of Conventional & Islamic Banks in Pakistan

“…Furthermore, Islamic banks are constrained in using some of the risk mitigation instruments that their conventional counterparts use as these are not allowed under Islamic commercial law due to the presence of gharar and element of riba (Ahmed & Khan, 2007). Khan et al (2016) Suggests to the fiqh scholars to review their position and allow the Islamic banks to use these contemporary contracts such as future. Swaps and options for hedging 3 .…”

“…Swaps and options for hedging 3 . Ali (2015) and Zakaria and Ismail (2007) constructed the empirical and conceptual setting to examine the impact of CRT on lending and financial stability of (2011) and Khan et al (2016) conducted quantitative research to examine the factors that affect the decision of firms to use the foreign exchange derivative (FX). This research is conducted by taking 86 non-financial firms listed in (2011)) and Ahmed and Khan (2007) in their studies examined factors that affected the decision of firm to utilize FX derivatives, without considering other forms of derivatives i.e.…”

“…gross financing to total assets (GF), net financing to total assets (NF). By adopting the methodology of Afza and Alam (2011) and Khan et al (2016), this study takes the nominal sum of credit derivative instruments as a proxy of risk transfer techniques. Further some bank specific factors and macro-economic factors are also included in the equation (1) that is; capital ratio, profitability ratio, liquidity ratio, GDP, interest rate and exchange rate.…”

Corporate Social Responsibility in Malaysia

“…Most companies nowadays are facing important challenges due to the economic crisis. In order to overcome the critical challenges, companies need to consider themselves as socio-economic agents contributing to the community (Khan, et al, 2016;Sallayici & Kolayis 2018). It is considered as a strategy for the companies" economic, social and environmental development.…”