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korean management review - Vol. 51 , No. 1

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korean management review - Vol. 51, No. 1, pp. 25-46
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 28 Feb 2022
Received 05 Sep 2021 Accepted 01 Oct 2021
DOI: https://doi.org/10.17287/kmr.2022.51.1.25
The Use of Derivatives and the Foreign Exchange Exposure of KOSDAQ Companies
Taek Ho Kwon
(First Author) College of Economics and Management, Chungnam National University (thk5556@cnu.ac.kr)
코스닥 기업의 파생상품 사용과 환노출

Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.


Funding Information ▼ Chungnam National University

Abstract

This study analyses the relationship between using derivatives and the foreign exchange exposure of non-financial companies in the KOSDAQ market from 2011 to 2019. The study shows that export ratio, foreign currency debt ratio, size of company, and debt ratio increased the likelihood of using derivatives. Moreover, it was found that companies with high dividend ratios and those with low largest shareholder holding ratios had a higher likelihood of using derivatives. This indicates that companies in the KOSDAQ market actively consider risk management in their decisions to use derivatives. An analysis of the relationship between the use of derivatives and foreign exchange exposure revealed that foreign currency liabilities had a significant relationship with foreign exchange exposure. These results suggest that companies need to devote more attention to the management of foreign exchange exposure from foreign currency liabilities. The results of this study demonstrate that KOSDAQ market companies use derivatives appropriately to manage their foreign exchange exposure. Considering that KOSDAQ companies incurred substantial losses from the derivatives used to manage their foreign exchange exposure during the global financial crisis, the results of this study have significant implications for understanding KOSDAQ market companies' foreign exchange exposure management.


Keywords: KOSDAQ market, Derivatives, Exchange rate exposure, Foreign currency debt, Risk management

Acknowledgments

This study is supported by the Research Supporting Program of Chungnam National University(CNU) in 2020.

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∙ The author Taek Ho Kwon is currently a professor at Chungnam National University. He graduated from College of Economics and Management at Chungnam National University and earned his master's and doctoral degrees from Seoul National University. His main research areas are foreign exchange risk management, corporate diversification, and retirement planning.