Deriving value or risk? Determinants and the impact of emerging market banks’ derivative usage

Jad Bazih (1) , Dieter Vanwalleghem (1)

1 ESC [Rennes] - ESC Rennes School of Business

This paper examines the determinants of the emerging market banks’ derivative usage and the impact of derivative usage on bank value, total risk and bank stability. Our empirical evidence first suggests that derivative usage is driven primarily by net interest margin, bank concentration and institutional strength. In addition, although derivative usage appears to reduce emerging market bank value, it does not affect total risk. Moreover, emerging market banks can reduce bank instability using derivatives. Our findings have important implications for investors and policy makers focusing on emerging derivatives markets.

Mots clés: Banks; Derivatives; Emerging markets

Domaines: Économie et finance quantitative [q-fin]

Jad Bazih, Dieter Vanwalleghem. Deriving value or risk? Determinants and the impact of emerging market banks’ derivative usage. Research in International Business and Finance, 2021, 56, pp.101379. ⟨10.1016/j.ribaf.2020.101379⟩. ⟨hal-03329217⟩