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The purpose of this paper is to assess the effect of financial derivatives use on different exposures by comparing domestic firms, domestic multinational corporations (MNCs) and affiliates of foreign MNCs using a unique hand-collected data set of derivatives activities from 881 non-financial firms in eight East Asian countries over the period of 2003-2013.

In this paper, the authors apply a two-stage approach. In the first stage, exposures to country risks, exchange rate and interest rate risks are estimated by using the market model. In the second stage, potential effects of firms’ derivatives use on multifaceted exposures are investigated by carrying out pooled regression model, and panel data regressions with random effect specifications.

The authors provide novel evidence that financial hedging of domestic firms and domestic MNCs reduces exposure to home country risks by 10.91 and 14.42 percent per 1 percent increase in notional derivative holdings, respectively, while affiliates of foreign MNCs fail to mitigate exposure to host country risks. The use of foreign currency and interest rate derivatives by domestic firms and domestic MNCs is effective in alleviating such firms’ exposures to varied degrees, while foreign affiliates’ use of derivatives can only lower interest rate exposures.

The primary theoretical contribution of this study is applying the market model to estimate exposures to home and host country risks. Regarding empirical contributions, the authors provide strong evidence that the use of financial derivatives by domestic firms and domestic MNCs significantly contributes to a decline in exposure to home country risks, and evidence the outperformance of domestic MNCs vis-à-vis domestic firms and foreign affiliates.

This study examines the foreign currency derivatives trading of KOSDAQ firms and analyses the relations of derivatives trading and foreign exchange rate exposure in the period 2005~2010. The amount of derivatives trading reaches 27.7% of total assets for the trading firms before global financial crisis period (2005~2007). While, the amount decreases to 17.6% of total assets during the crisis period (2008~2010). These amounts are much greater than those of KOSPI firms which are calculated using similar data specification and periods. The variables which are usually adopted as determinants of derivatives trading do not explain the usage of derivatives in the analysis of period 2005~2007. These results suggest that KOSDAQ firms use derivatives not only foreign exchange risk managements but also trading purposes during this period. Test results do not show sufficient evidence that KOSDAQ firms use derivatives trading in an effective manner to manage foreign exchange rate exposure. In sum, test results suggest that to achieve the goal of managing foreign exchange rate exposure firms should estimate their open position in foreign currency properly before conducting foreign currency derivatives trading.

This study aims to extend the literature by extensively investigating the impact of foreign exchange and interest rate changes on the returns and volatility of bank stocks in Saudi Arabia, which is the largest dual banking industry.

This study employs the generalized autoregressive conditional heteroscedasticity (GARCH) model on stock returns of four fully Islamic Saudi banks and eight conventional Saudi banks.

The results showed that the foreign exchange rate return has a positive impact on Saudi conventional bank returns, while it has an adverse impact on Saudi Islamic bank returns. Moreover, a higher interest rate return has a positive impact on Saudi bank stock returns implying that the assets side is more sensitive to changes in interest rates than the liability side. Finally, higher foreign exchange and interest rates volatility increases the volatility of Saudi bank returns, where the former has the largest significant impact. Therefore, Saudi regulators should pay more attention to the risk management of their banks because this could threaten the stability of their financial system.

To the best knowledge of the author, this is the first study that tries to extensively analyze the joint impact of foreign exchange and interest rates on bank stock returns and volatility in Saudi Arabia by applying the GARCH model. The study uses a long data set from 2010 to 2019 that includes all Saudi banks and employs four measures of interest rates to increase the robustness of the results.

This study investigates the impact of derivatives as risk management strategy on the value of Malaysian firms. This study also examines the interaction effect between derivatives and managerial ownership on firm value.

The study examines 200 nonfinancial firms engaged in derivatives for the period 2012–2017 using the generalized method of moments (GMM) to establish the influence of derivatives and managerial ownership on firm value. The study refers to two related theories (hedging theory and managerial aversion theory) to explain its findings. Firm value is measured using Tobin's Q with return on assets (ROA) and return on equity (ROE) as robustness checks.

The study found evidence on the positive influence of derivatives on firm value as proposed by the hedging theory. However, the study concludes that managers less hedge when they owned more shares based on the negative interaction between derivatives and managerial ownership on firm value. Hedging decision among managers in Malaysian firms therefore does not subscribe to the managerial aversion theory.

This study focuses on the derivatives (foreign currency derivatives, interest rate derivatives and commodity derivatives) and managerial ownership that is deemed relevant and important to the Malaysian firms. Other forms of ownership such as state-/foreign owned and institutional ownership are not covered in this study.

This study has important implications to managers and investors. First is on the importance of risk management using derivatives to increase firm value, second, the influence of derivatives and managerial ownership on firm value and finally, the quality reporting on derivatives exposure by firms in line with the required accounting standard.

There is limited empirical evidence on the impact of derivatives on firm value as well as the influence of managerial ownership on hedging decisions of Malaysian firms. This study analyzes the influence of derivatives on firm value during the period in which reporting on derivatives in financial reports is made mandatory by the Malaysian regulator, hence avoiding data inaccuracy unlike the previous studies on Malaysia. This study therefore fills the gap in the literature in relation to the risk management strategies using derivatives in Malaysia.

This paper aims to obtain a recent estimate of the cost of precautionary foreign reserve accumulation that emerging market and developing economies (EMDEs) had to endure to protect themselves against the risks of financial globalization. In addition, the study estimates the cost of excess reserves in emerging market economies (EMEs) using various reserve adequacy indicators that reflect potential sources of foreign exchange drains and vulnerability in EMEs' balance of payments.

This paper begins by explaining the accumulation of foreign reserves in EMDEs as a self-protection strategy against the risks of financial globalization. Next, it sheds light on the different types of economic costs of foreign reserve accumulation. Finally, it estimates the cost of foreign reserve accumulation in EMEs during the period (1990–2018) and in EMDEs during the period (1990–2015) due to data availability.

Results indicate that the cost of accumulating foreign reserves as a self-protection strategy in EMDEs and EMEs' was huge compared to their development financing needs. Applying various reserve adequacy measures demonstrates that many of the EMEs were holding inadequate precautionary reserves in 2018. Actually, this reflects the significant increase in external short term debt that many of the EMEs have witnessed since the eruption of the global financial crisis (2008). Thus increasing reserves in EMEs with weak reserve buffers and higher external debt is critical as they are more vulnerable to external shocks and capital flow reversals. Also given the estimated huge costs of accumulating foreign reserves, EMDEs should accompany it by other complementary self-protection policies and liquidity management policies to free up resources for productive investment.

The study contributes to the literature by estimating the cost of precautionary foreign reserve accumulation imposed on EMDEs during an extended period of time that covers a decade after the onset of the global financial crisis. Also to the authors' knowledge, this is the first study that estimates the cost of excess reserves in EMEs using various reserve adequacy indicators including the International Monetary Fund (IMF) assessing reserve adequacy (ARA) approach.

This study investigates whether the disclosure of derivatives is value relevant in emerging markets and evaluates the effects of the 2008/2009 global financial crisis on the value relevance of derivative disclosures.

Panel regression models using sub-samples and a crisis interaction term were applied to a sample of the 200 largest non-financial firms by market capitalization listed on the Johannesburg Stock Exchange (JSE) from 2005 to 2017 to assess the consequences of the financial crisis.

The results suggest that the disclosure of derivatives is value relevant in the hitherto understudied context of emerging markets. The 2008/2009 financial crisis had a significant impact on derivatives use and the value relevance of derivatives disclosure by JSE-listed companies.

Companies should reconsider both how they employ derivatives as part of their risk management practices and how they communicate derivatives use to stakeholders in the financial statements. The findings facilitate a comparative analysis across various market contexts by researchers and assist investors in better decision-making. The findings can influence regulatory practices and can help standard setters to review disclosure requirements.

The benefits of corporate hedging were studied from an emerging market perspective, using an original dataset and approach to investigate the effects of international financial volatility on emerging markets. The authors tested whether companies are valued differently, based on their disclosure of the use of derivatives in the financial statements, and the effect of the financial crisis on the value relevance derivatives disclosures.

This study aims to investigate Malaysian stock market efficiency from the view of Sharīʿah-compliant and conventional stocks based on the effectiveness of technical trading strategies.

This study uses unconventional trading strategies that mix buy recommendations of Bursa Malaysia analysts with sell signals generated from 10 selected technical trading strategies (simple moving average, moving average envelopes, Bollinger Bands, momentum, commodity channel index, relative strength index, stochastic, Williams percentage range, moving average convergence divergence oscillator and shooting star) that are detected using ChartNexus. The period from 1 January 2013 until 31 December 2015 produces a total sample consisting of 1,265 buy recommendations of 125 Sharīʿah-compliant stocks and 400 buy recommendations of conventional stocks. The study period is extended until 31 March 2016 to provide an ample time for detecting the sell signal especially for buy recommendations that are released towards the end of 2015.

The resulting Jensen’s alpha show 8 out of 10 strategies are effective in generating abnormal returns in Sharīʿah-compliant samples while only 3 out of 10 strategies are effective in conventional samples. Prominent effectiveness of technical trading strategies in Sharīʿah-compliant stocks implies clear inefficiency in that stock market segment as opposed to those of the conventional stocks.

The results based on unconventional trading strategies provide new insights of Malaysian stock market efficiency especially in Sharīʿah-compliant and conventional stocks. The paper provides more robust findings on market efficiency as firms’ equity level data were focussed together with analysts’ buy recommendations from Bursa Malaysia.

The purpose of this paper to analyze the risk reporting practices and its determinants of commercial banks during the period of the adoption of the Basel II Accord in Portugal.

The paper conducts a content analysis of the risk and risk management sections included in the management reports and the notes of the annual reports of Portuguese commercial banks, for the years 2007, 2010 and 2013.

Findings show that theoretical frameworks underpinned in agency and legitimacy theories continue to provide valid explanations for risk reporting by Portuguese banks. More specifically, findings indicate that agency costs, public visibility and reputation are crucial drivers of risk reporting. Findings also indicate that younger banks with lower risk management skills use risk reporting either as an informational process or as a channel to manage organizational legitimacy.

The content analysis does not allow readily for in-depth qualitative inquiry. The coding instrument is subject to coder bias. Information about risk can be provided in sources other than annual reports. Additionally, not all banks disclose information on corporate governance-related variables that could also influence risk reporting.

The current research setting has never been studied hitherto. In this sense, this study seems to be of great relevance given the scarcity of literature on the subject in Portugal.