Corporate risk management in Hong Kong and Singapore

Elizabeth Sheedy (Macquarie Applied Finance Centre, Macquarie University, New South Wales, Australia)

Managerial Finance

ISSN: 0307-4358

Publication date: 1 February 2006

Abstract

Purpose

To better understand corporate risk management practice in Hong Kong and Singapore. To explore popular perception that use of derivatives in Hong Kong and Singapore lags that in the US. To explore possible speculative use of derivatives in these Asian countries.

Design/methodology/approach

A survey of non‐financial corporations using the format of the 1998 Wharton study. I investigated the extent to which derivatives are used, how they are used, and methods for their oversight.

Findings

Derivatives are used more extensively in Hong Kong and Singapore than in the US. They are particularly popular for managing foreign exchange risk. Their use is more speculative than is common in the US; that is, market predictions play a significant role in the size and timing of hedge trades and derivatives are often used for active management of exposures. A lack of controls and management oversight (such as derivatives policies, regular valuations) is apparent, despite the extent of derivatives use.

Research limitations/implications

Potential bias may have arisen due to the method used for recruiting survey respondents. In this study post‐graduate students contacted and interviewed company staff, often based on their personal contacts. In contrast, the Wharton surveys have been mailed to potential respondents. Students may have been more likely to select companies that traded derivatives. The sample size (131 firms) is smaller than that of the Wharton studies, but probably sufficient to establish common trends.

Practical implications

Need to address poor oversight of derivatives trading in order to prevent further disasters. Need to scrutinise the speculative use of derivatives to ensure that it is value‐adding for firm owners.

Originality/value

To highlight the extent of speculative use of derivatives in Hong Kong and Singapore. To encourage further scrutiny and controls over the use of derivatives by directors of and investors in non‐financial corporations in these countries.

Keywords

Citation

Sheedy, E. (2006), "Corporate risk management in Hong Kong and Singapore", Managerial Finance, Vol. 32 No. 2, pp. 89-100. https://doi.org/10.1108/0307435061064188

Download as .RIS

Publisher

:

Emerald Group Publishing Limited

Copyright © 2006, Emerald Group Publishing Limited

To read the full version of this content please select one of the options below

You may be able to access this content by logging in via Shibboleth, Open Athens or with your Emerald account.
To rent this content from Deepdyve, please click the button.
If you think you should have access to this content, click the button to contact our support team.