The Dynamics of Foreign Exchange Derivative Use in China

Yidi Sun and Bruce Morley
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Yidi Sun: Department of Economics, University of Bath, Bath BA2 7AY, UK
Bruce Morley: Department of Economics, University of Bath, Bath BA2 7AY, UK

JRFM, 2021, vol. 14, issue 7, 1-18

Abstract: The aim of this study is to determine the main factors affecting the use of foreign exchange hedging instruments by Chinese firms, following their regulatory changes in the derivative markets. The original contributions to this literature include the use of a panel dataset of 316 Chinese firms with the data running from 2012 to 2017 and a dynamic random effects probability approach. The results suggest the main determinants of derivative use are the overseas trade conducted by these firms, with some evidence of non-linearity, as well as firms being more likely to use derivatives when there is more information asymmetry and agency problems, potentially due to greater controls on their use in China.

Keywords: hedging; derivative; dynamic panel; exports (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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