Determinants of Derivatives in China

The data is from the manufacturing firms in the Shenzhen stock market and is a panel data set. The research assesses the main determinants of the use of foreign exchange derivative use in China. The dependent variable is binary, taking the value of 1 if derivatives are used in a particular year and by a specific firm, 0 otherwise. The determinants include foreign business, measures of asymmetric information and agency problems as well as the main firm characteristics. The firm data is taken from the Wind database. The main findings are that foreign business is the main determinant of derivative use, with some evidence of a non-linear relationship. Apart from size, most firm specific characteristics are not significant.