Abstract:

One of the most effective methods firms can use in risk management is derivative instruments. Determination of the factors that affect the decision to use derivative instruments is of great importance in increasing the use of derivative instruments by firms. The aim of this study is to identify firm-specific financial factors affecting the use of derivative instruments by firms. Data of 176 firms operating in the manufacturing industry sector in Istanbul Stock Exchange (ISE) are used in the study for the period 2014:12-2018:12. Financial leverage ratio, current ratio, size and return on assets, which are expected to affect the use of derivative instruments, are modeled. As a result of the study in which binary logistic regression analysis is conducted that the decision to use derivative instruments has a positive relationship between size and, a negative relationship between leverage, current ratio and return on assets. According to the result of the study, derivative instruments can be used as an effective method in risk management in firms with low liquidity level, large scale and low profitability.

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