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The impact of derivative use on firm risk and firm value. Evidence from South African non-financial firms
This dissertation investigates the extent of derivatives use in South Africa. In addition, it examines the effect of derivatives use on firm risk and value. The dissertation is based on a sample of 91 South African non-financial firms listed on the FTSE/JSE Africa All Share Index on the JSE over the...
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| Format: | Thesis |
| Language: | English |
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Department of Finance and Tax
2021
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| _version_ | 1867613218542714880 |
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| access_status_str | Open Access |
| author | Mwangi, Edwin |
| author2 | Majoni, Akios |
| author_browse | Majoni, Akios Mwangi, Edwin |
| author_facet | Majoni, Akios Mwangi, Edwin |
| author_sort | Mwangi, Edwin |
| collection | Thesis |
| description | This dissertation investigates the extent of derivatives use in South Africa. In addition, it examines the effect of derivatives use on firm risk and value. The dissertation is based on a sample of 91 South African non-financial firms listed on the FTSE/JSE Africa All Share Index on the JSE over the sample period 2012 to 2016. Firm risk is measured using total risk, systematic risk and unsystematic risk while the Tobin's Q is used as the proxy for firm value. The results of this dissertation show that 62% of firms included in this sample use derivatives. Foreign currency derivatives were the most commonly used as 80.3% of firms used them followed by interest rate derivatives at 46% and then commodity price derivatives at 21.8%. This dissertation provides evidence that the use of derivatives significantly reduces total risk and unsystematic risk. However, the use of derivative does not have an effect on systematic risk. The use of derivatives increases firm value although this increase is not statistically significant. Overall, this dissertation finds evidence of risk reduction related to derivative usage but fails to establish the value premium that is created by derivative use. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/32923 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:32:39.476Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2021 |
| publishDateRange | 2021 |
| publishDateSort | 2021 |
| publisher | Department of Finance and Tax |
| publisherStr | Department of Finance and Tax |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/32923 The impact of derivative use on firm risk and firm value. Evidence from South African non-financial firms Mwangi, Edwin Majoni, Akios Finance and Tax This dissertation investigates the extent of derivatives use in South Africa. In addition, it examines the effect of derivatives use on firm risk and value. The dissertation is based on a sample of 91 South African non-financial firms listed on the FTSE/JSE Africa All Share Index on the JSE over the sample period 2012 to 2016. Firm risk is measured using total risk, systematic risk and unsystematic risk while the Tobin's Q is used as the proxy for firm value. The results of this dissertation show that 62% of firms included in this sample use derivatives. Foreign currency derivatives were the most commonly used as 80.3% of firms used them followed by interest rate derivatives at 46% and then commodity price derivatives at 21.8%. This dissertation provides evidence that the use of derivatives significantly reduces total risk and unsystematic risk. However, the use of derivative does not have an effect on systematic risk. The use of derivatives increases firm value although this increase is not statistically significant. Overall, this dissertation finds evidence of risk reduction related to derivative usage but fails to establish the value premium that is created by derivative use. 2021-02-23T05:24:58Z 2021-02-23T05:24:58Z 2020 2021-02-23T05:06:05Z Master Thesis Masters MCom http://hdl.handle.net/11427/32923 eng application/pdf Department of Finance and Tax Faculty of Commerce |
| spellingShingle | Finance and Tax Mwangi, Edwin The impact of derivative use on firm risk and firm value. Evidence from South African non-financial firms |
| thesis_degree_str | Master's |
| title | The impact of derivative use on firm risk and firm value. Evidence from South African non-financial firms |
| title_full | The impact of derivative use on firm risk and firm value. Evidence from South African non-financial firms |
| title_fullStr | The impact of derivative use on firm risk and firm value. Evidence from South African non-financial firms |
| title_full_unstemmed | The impact of derivative use on firm risk and firm value. Evidence from South African non-financial firms |
| title_short | The impact of derivative use on firm risk and firm value. Evidence from South African non-financial firms |
| title_sort | impact of derivative use on firm risk and firm value evidence from south african non financial firms |
| topic | Finance and Tax |
| url | http://hdl.handle.net/11427/32923 |
| work_keys_str_mv | AT mwangiedwin theimpactofderivativeuseonfirmriskandfirmvalueevidencefromsouthafricannonfinancialfirms AT mwangiedwin impactofderivativeuseonfirmriskandfirmvalueevidencefromsouthafricannonfinancialfirms |