Managerial Incentives and the Use of Foreign‐exchange Derivatives by Banks

Adkins, Lee C.; Carter, David A.; Simpson, Wayne

doi:10.1111/j.1475-6803.2007.00220.x

Cited by 36 publications

(26 citation statements)

References 26 publications

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“…CDs' usage is already documented in previous studies for commercial banks (Selvi and Turel, 2010;Adkins et al, 2007;Sinkey and Carter, 2000. But for MBs as a group, this has not been done.…”

Section: Problem Statementmentioning

confidence: 92%

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The usage of currency derivatives in multilateral banks

Kamau¹,

Inanga

Rwegasira

2015

Management Research Review

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Access to this document was granted through an Emerald subscription provided by emeraldsrm:198285 [] For AuthorsIf you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to investigate the extent to which multilateral banks (MBs) use currency derivatives (CDs) to hedge and speculate in managing currency risk. It aims to provide an empirical assessment of CDs products used by MBs as a group not studied before. Design/methodology/approach -Quantitative hypothesis regarding the usage of CDs to minimize adverse impact of currency risk was tested using z test about population proportion. Findings -The results show that MBs are using CDs in the following order of importance: currency swaps, currency forwards, currency options and currency futures primarily to hedge currency risk. Research limitations/implications -The results of the study can be generalized only for MBs, given their peculiar characteristics as wholesale banks, which are owned mainly by governments and are generally not listed in the stock exchanges. Originality/value -The study is of value to those interested in the multilateral banking industry. The authors acknowledge that it is the first study providing empirical evidence on CDs' usage by MBs as a group. The results are particularly useful to managers of MBs in terms of helping them to make choices in usage of CDs. The paper has also policy implications in terms of justifying the current self-regulatory status, shareholder monitoring and governance of MBs, as they do not speculate with CDs.

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Section: Problem Statementmentioning

confidence: 92%

“…Of the banks studied, 86 per cent used CDs for hedging and 46 per cent for speculative purposes. Adkins et al (2007) investigated the relationship between managerial incentives (such as compensation and ownership) and use of FX derivatives by US bank holding companies.…”

mentioning

confidence: 99%

The usage of currency derivatives in multilateral banks

Kamau¹,

Inanga

Rwegasira

2015

Management Research Review

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“…As for ROA and ROE, they were calculated by using the data collected from the relevant financial statements from either of Morningstar DatAnalysis Premium or FinAnalysis. Consistent with the study of Adkins et al (2007) which includes all the Bank Holding Companies with total assets over $1 billion from the Federal Reserve System, this study used all ADIs with the variables of interest available from the APRA"s ADIs list in order to ensure that the sample is large enough for testing using regression. Consequently, the data used to test the hypotheses are drawn from the ADIs regulated by APRA, which represents most of financial companies both listed and unlisted in Australia.…”

Section: Data Sourcesmentioning

confidence: 99%

Association between Key Management Personnel Remuneration and the Performance of Authorized Deposit-Taking Institutions in Australia

Munir

Kilgore

2015

ijafr

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The study investigates the association between each component of key management personnel remuneration (short-term and long-term remuneration) and total remuneration, and the performance of Authorized Deposit-taking Institutions (ADIs) in Australia. Data were collected from 91ADIs regulated by the Australian Prudential Regulation Authority. The study provides evidence that total key management personnel remuneration, short-term key management personnel remuneration and long-term key management personnel remuneration are significantly associated with the performance of ADIs, while the pay-performance association is weaker for long-term remuneration as compared to total remuneration and short-term remuneration. In addition, size of the board, existence of remuneration board committee and composition of remuneration board committee is significantly associated and composition of the board is partially associated with the performance of ADIs in Australia. The findings of the study also suggest that the pay-performance association is more sensitive for short-term remuneration as compared to long-term remuneration, indicating that although long-term remuneration is widely used by ADIs, short-term remuneration is an important part of key management personnel remuneration. International Journal of Accounting and Financial ReportingISSN 2162-3082 2015, Vol. 5, No.

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“…As interest rates have become more volatile, depository institutions have recognised the importance of derivatives, particularly interest rate futures and interest rate swaps, in reducing risk and achieving acceptable financial performance. Moreover, Adkins, Carter, and Simpson (2007) argued that higher investment allocation is channelled to derivative instruments because management has been persuaded on the effectiveness of derivatives in reducing interest rate and foreign exchange risk. According to Smith and Stulz (1985), banks use derivative instruments for hedging purposes.…”

Section: Derivatives and Their Relationship With Risk Management In Cmentioning

confidence: 99%