Today, as firms conduct business operations under rapidly changing economic environments, they face a wide range of operational and financial risks. As the proper management of these risks has come to be recognized as essential for corporate survival and development, risk management has established itself as a critical element of corporate strategy. In response to this trend, the need for empirical research on the utilization of hedging instruments and means of securing appropriate returns for risk has also been increasing. Accordingly, this study aimed to identify the economic rationales for derivative usage by analyzing the determinants of derivative use among Korean firms that employ derivatives as risk management instruments. The analysis yielded the following results. First, a negative relationship was found between financial risk and derivative usage, and a positive relationship was found between liquidity and derivative usage, indicating that—contrary to expectations—firms with lower financial risk and greater liquidity tended to use derivatives to a greater extent ex post. This finding suggests that Korean firms' awareness of the importance of risk management is relatively low and that derivative usage has not yet become widespread. Furthermore, these results were found to be influenced by firm size: the negative relationship between financial risk and derivative usage was stronger among smaller firms, while the positive relationship between liquidity and derivative usage was stronger among larger firms. Second, firms with greater capital expenditures and greater tax schedule progressivity exhibited increased incentives to hedge using derivatives. Third, among firms exposed to foreign exchange risk, those with greater foreign-denominated debt showed increased incentives to use derivatives. In particular, the positive relationship between foreign sales or foreign debt and derivative usage was found to be stronger among firms with a lower degree of geographic diversification, revealing that the degree of geographic diversification exerts a negative moderating effect on derivative usage.