The Determinants of FX Derivatives Use: Empirical Evidence from Turkish Non-Financial Firms in BIST

Mustafa Akay, Doruk Küçüksaraç and Muhammed Hasan Yilmaz

CBT Research Notes in Economics from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: [EN] The increasing share of foreign currency debt in emerging market corporates has drawn attention in the last years. Therefore, containing FX risk of the corporates has become a priority for emerging markets. In this regard, the use of FX derivatives is one of the most commonly used solutions to hedge against FX risk. However, there seems to be substantial heterogeneity across the corporates in terms of derivative use. Therefore, understanding which corporates are more likely to engage in FX derivatives is crucial in terms of policy design. This study aims to determine firm-specific factors for derivative use of the nonfinancial firms quoted in Borsa Istanbul (BIST). The descriptive findings show that off-balance sheet accounts driven by FX derivatives have increased as well as on-balance sheet FX short position, which indicates that some of the Turkish nonfinancial firms engage in hedging activities. The study also employs a probit model for the identification of common characteristics of non-financial firms which use FX derivative instruments. It is found that firms with larger size and higher leverage ratios tend to utilize FX derivatives more whereas the firms with considerably ample liquidity buffers and higher tangible assets tend to use fewer FX derivatives. Then, we investigate the extent of derivative use with fixed effects panel regressions. The results show that firm size, tangibility ratio and degree of internationalization are found to be significant determinants of the extent of derivative use. [TR] Gelismekte olan ulke (GOU) firmalarinin doviz borclulugundaki son yillardaki artis dikkat ceken seviyelere gelmistir. Bu nedenle, firmalarin doviz kuru riskini azaltmak gelismekte olan ulkeler acisindan oncelik haline gelmistir. Bu baglamda, doviz kuru uzerine yazilmis turev araclarin (doviz turev) kullanilmasi, en yaygin yontemlerden biri olarak on plana cikmaktadir. Bununla birlikte, turev arac kullanimi acisindan firmalar arasinda heterojenlik gozlenmektedir. Bu nedenle, hangi tip firmalarin doviz turev araclarini kullandiginin ve kullanim tutarinda belirleyici olan unsurlarin anlasilmasi politika tasarimi acisindan onem tasimaktadir. Bu calismada, Borsa Istanbul'da (BIST) islem goren finansal kesim disi firmalarin turev kullaniminda belirleyici olan unsurlar incelenmektedir. Tanimlayici bulgular, doviz turev araclari tarafindan kaynaklanan bilanco disi pozisyonun, bilanco ici doviz acik pozisyonunu ile beraber arttigini gostermektedir. Bu durum, bazi firmalarin riskten korunma faaliyetlerinde bulunduguna isaret etmektedir. Calismada ayrica doviz turev araclari kullanan finansal kesim disi firmalarin ortak ozelliklerinin belirlenmesi icin kullanilan probit model sonuclari, buyuk firmalarin veya yuksek kaldirac oranlarina sahip firmalarin doviz turev araclarini daha fazla kullanma egiliminde oldugunu, ancak yuksek likidite tamponu ve maddi varliga sahip firmalarin ise daha az doviz turev araci kullanma egiliminde oldugunu gostermektedir. Son olarak, turev kullanim hacmi sabit etkiler panel regresyonlari ile incelenmis olup sonuclar, firma buyuklugunun, maddi duran varlik oraninin ve operasyonel anlamda uluslararasilasma derecesinin turev kullanim hacminde belirleyici oldugunu gostermektedir.

Date: 2019
New Economics Papers: this item is included in nep-acc, nep-ara and nep-bec
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