Derivatives usage in UK non-financial listed companies

A rule extraction based approach in predicting derivative use for financial risk hedging by construction companies

“…They confirmed that a high percentage of firms consider derivative activity to be an important hedging tool (Bailly, Browne, Hicks, & Skerrat, 2003). The number of recent studies associated with risk management and hedging is growing (Barria & Hall, 2002;Mallin, Ow-yong, & Reynolds, 2001;Panayides, 2006;Prevost, Rose, & Miller, 2000;Sheng, 2005). Nevertheless, construction related industries in Taiwan (such as the real estate industry) only began to make use of derivatives for risk management in the last decade of the 20th century.…”

The corporate use of derivatives: a survey of South Africa’s large listed non-financial firms

“…In a later study, Bodnar, Hayt and Marston (1998) found that large firms were far more likely to use derivatives. For the UK, although on average, 60% of companies used derivatives, large firms tend to make greater use of derivatives with 80% of firms with turnover over GBP241 million using derivatives, whilst 100% of firms with sales over GBP1000 million were found to use derivatives (Mallin, Ow-Yong and Reynolds, 2001). In an earlier survey, over 90% of the largest (FTSE 250) companies in the UK made use of derivatives (Grant and Marshall, 1997).…”

“…Employing the results of the Bodnar et al (1998) study and making the USA and Dutch samples comparable by matching and weighting the responses for the USA survey on the basis of firm size and industry sector, the survey found that 60% of Dutch firms used derivatives as compared to 44% of a comparable set of USA firms. In the UK, it was found that on average 60% of firms used derivatives (Mallin, Ow-Yong and Reynolds, 2001). A later survey by ElMasry (2006) of 401 UK non-financial firms found that 67% of the 173 respondents made use of derivatives.…”

“…The 1995 Wharton School survey of derivative usage in the USA (Bodnar, Hayt, Marston, and Smithson, 1995) gave rise to further surveys Marston, 1996 andMarston, 1998). The Wharton School surveys led to similar surveys of corporate derivative usage in other countries such as Sweden Hagelin, 1999 andPramborg, 2006) , Germany (Bodnar and Gebhardt, 1999), Netherlands (Bodnar, Hayt, de Jong and Macrae, 1995), Belgium (De Ceuster, Durinck, Laveren, and Lodewyckx, 2000), the United Kingdom (Mallin, Ow-Yong, andReynolds, 2001 andEl-Masry, 2006), Australia (Berkman, Bradbury, Hancock, andInnes, 2002 andBenson andOliver, 2004), and New Zealand (Berkman, Bradbury and Magan, 1997). These studies employed a similar methodology and questionnaire.…”

“…Grant and Marshall (1997) surveyed large UK firms and found that OTC forwards and options were used to hedge foreign exchange risk. A later survey of UK firms, found that derivatives are mostly employed to hedge contractual obligations and that OTC forwards are mainly used to hedge foreign exchange rate risk (Mallin, Ow-Yong and Reynolds, 2001). El-Masry (2006) found that UK firms firstly use derivatives to hedge currency risk followed by the use of derivatives to hedge interest rate risk.…”