The Study On The Impact Of Usage Of Derivatives On China Listed Banks’ Performance And Risk

Since the 1970 s, great changes had taken place in international financial market, foreign exchange rate risk and interest rate risk increased seriously. Companies met with more and more uninsurable risk in complex business environment. So they used derivatives as a main method to avoid risk. The demand for derivatives was increasing year by year. Since the derivatives were introduced in C hina in the 1990 s, they were developed well in C hina. Listed banks in C hina used derivatives more than other companies no matter in scale or in variety.Under this background, the study of the derivatives’ using effect in the listed banks of China is particularly important. This paper examines the effect of using the derivatives to banks’ performance and the level risk of banks. It takes 16 banks listed on Shanghai and Shenzhen stock exchange as the research object and selects the panel data of 16 banks’ annual financial reports from 2007 to 2013 as the research sample. The empirical results show that the use of derivatives is positively associated with bank performance and the level of risk, but the use of derivatives is weakly negatively associated with bank value. Finally, according to the result of empirical analysis, we make some good suggestions to banks.