preview

The Effect of Derivatives Usage on Firm Value and Performance

Better Essays

The Effect of Derivatives Usage on Firm Value and Performance:
The Study on Malaysian Publicly Listed Firms Between 2008 and 2012

An undergraduate thesis proposal
Presented to the Accountancy Department
De La Salle University
2401 Taft Avenue, Manila, Philippines

in partial completion of the course requirements of
Bachelor of Science in Accountancy

Camposagrado, Raphael Luis C. de Vera, Jan Neil P.
Garcia, Carlos Oliver G.

De La Salle University

August 2013

Table of Contents
CHAPTER 1 - THE RESEARCH PROBLEM 7 1.1 Background of the Study 7 1.2 Statement of the Problem 9 1.3 Objectives of the Study 9 1.4 Conceptual/Theoretical Framework 10 1.4.1 Rational Expectations Theory …show more content…

Despite the realized dangers, each actual dollar value of derivatives at present supports between $35 and $70 of notional value. This means that minimal losses from the face value would suffice to destroy even the best-capitalized derivatives traders (Sivy, 2013). Now, Asian economies begin to tap into the wealth of opportunities provided by derivative transactions as well. Singapore and Malaysia are leaders in the region with dedicated derivatives exchanges through the Singapore Exchange and the Bursa Malaysia respectively. These exchanges facilitate the increase of derivatives transactions with the SGX’s derivatives daily average volume growing 59% year-on-year during 2011 (JCN Newswire, 2013). Figure 1 illustrates the trend in volume of the derivatives exchange in terms of the number of contracts.

Figure 1. Movement of average daily derivative contracts traded on the Bursa Malaysia from 2004-2012 (Source: AmResearch)

As these established exchanges continue to prosper, neighboring developing countries such as the Philippines are also beginning to consider the creation of fully operational exchanges. With steady growth maintained at around 6% during 2013 (Magtulis, 2013), Philippine sectors such as in finance continue to welcome new innovations. For the financial sector, this means the introduction of new financial instruments.
This research paper is one of the first steps in understanding the

Get Access