Effect of derivatives on firm market value of companies under the composite indices of selected ASEAN+3 countries

• Main Authors: Chua, Jessica Anne A., Ladrillo, Dorothy Joy J., Sogono, Ma. Carminia A.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Derivative securities > Philippines; Derivative securities > Singapore; Derivative securities > Kuala Lumpur; Derivative securities > Malaysia; Derivative securities > Thailand; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/6972
• Institution: De La Salle University

Derivatives are financial instruments whose value is subject to change depending on the underlying asset in the contract. This type of financial instrument is more commonly used by firms as a tool for hedging for firm value creation purposes. For the past few years, the derivatives usage of the Philippines continues to increase and these are mainly composed of foreign exchange and interest rate swap transactions. Hence, this study aims to determine the effect of derivatives usage on firm market value of companies under the Philippine Stock Exchange index in comparison with those of the Straits Times index (Singapore), Kuala Lumpur composite index (Malaysia) and Stock Exchange of Thailand 50 (Thailand). The researchers aim to determine the significance and effect of derivatives usage to firm market value through firm leverage, firm capital and firm age. This study focused on timeframe of five years, from 2011 to 2015, and on four ASEAN+3 countries which were chosen based on their derivatives market development. Upon the analysis of the results through the method of triangulation, the researchers found that for the Philippines engaging in derivatives transactions is an effective way of reducing risk which, in turn, has a significant effect on firm market value. However, for a derivatives market to prosper, applicable and appropriate legal frameworks and regulations are needed.