DETERMINANTS OF CORPORATE HEDGING PRACTICES IN MALAYSIA

Abstract

This paper examines the impact of the firm specific factors on the use of derivative instruments for Malaysia firms. We find that there is a significant relationship between the use of derivatives and foreign sales, liquidity, firm growth, managerial ownership and size. Our findings suggest that only a few listed Malaysian firms have appropriate understanding of the derivatives instruments to mitigate risks in international business environment. Most Malaysian managers seem to be risk averse and do not understand the upside of taking position in the derivatives markets.