The use of derivatives, corporate risk management and firm financial performance: Evidence from non-financial listed companies in Zhejiang province, China

Recent empirical evidence (Liu & Ye, 2008) of American insurance industry suggests that the utilization of derivatives has no clear effect on firm’s financial performance. They indicate that due to the outcomes probably, insurance companies always use derivatives for speculation purposes instead of hedging business risks. However, unlike financial companies, financial derivatives have been mainly used to hedge business risks in non-financial companies. Jia & Chen (2009) empirically examined all non-financial companies listed on Shanghai and Shenzhen Stock Exchanges in 2007. They find that derivatives for risk management tool to hedge risk do have, to some extent, positive effect on improving firm’s financial performance.