The Research Of The Effect Of Financial Derivatives On Business Performance

With the dramatic changes in world interest rates, exchange rates and commodity prices, enterprises start to have the needs and motives of hedging. In the past20years, a number of derivatives developed fastly and also be accepted widely due to its function of hedge, leverage, and cheap cost.As economic globalization developing, the effect of risk management by using financial derivatives is getting the focus in most Chinese enterprises.Therefore, some theorical and practical researches on the financial derivatives application and its effect are introduced in this article. Firstly, based on relactive references, some theorical and practical articles and journals about the motive of financial derivatives application and the effect on companies are reviewed. Moreover, the concept, features, classification, and functions of financial derivatives are analyzed. Motivation theory of financial derivatives on publicly traded company is concluded. In addition, according to theories of risk management, hedging, entrusted angency, and information asymmetric, the ways to effect business performance by using derivatives are analyzed. Through the effect on financial strategy, investmental strategy, and distributional stategy, financial derivatives have an impact on business performance.Furthermore, the regulation, condition, and adoption of financial derivatives market are analyzed in this article. To verify the issue of motivations of publicly traded company and effects of financial derivatives,130observables form metal and nonmetal industry and electronic industry in Shenzhen and Shanghai Stock Market are interpreted. The result shows that motivations of publicly traded company and effects of financial derivatives partly support western countries’theories. Finally, based on the conclusion of above two parts of research results, specificly from government policies, market construction and enterprise author, some suggestion to deregulate part of government policies, to strengthen financial derivatives market construction, and to encourage enterprises to use financial derivatives in risk management are put forward.