Derivatives Usage in Risk Management by Us and German Non-Financial Firms: a Comparative Survey

29 Pages Posted: 6 Sep 1998 Last revised: 29 Oct 2022

See all articles by Gordon M. Bodnar

Gordon M. Bodnar

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS)

Günther Gebhardt

Goethe Universität Frankfurt am Main

Date Written: August 1998

Abstract

This paper is a comparative study of the responses to the 1995 Wharton School survey of derivative usage among US non-financial firms and a 1997 companion survey on German non-financial firms. It is not a mere comparison of the results of both studies, but a comparative study, drawing a comparable subsample of firms from the US study to match the sample of German firms on both size and industry composition. We find that German firms are more likely to use derivatives than US firms, with 78% of German firms using derivatives compared to 57% of US firms. Aside from this higher overall usage, the general pattern of usage across industry and size groupings is comparable across the two countries. In both countries, foreign currency derivative usage is most common, followed closely by interest rate derivatives, with commodity derivatives a distant third. In contrast to the similarities, firms in the two countries differ notably on issues such as the primary goal of hedging, their choice of instruments, and the influence of their market view when taking derivative positions. These differences appear to be driven by the greater importance of financial accounting statements in Germany than the US and stricter German corporate policies of control over derivative activities within the firm.

Suggested Citation

Bodnar, Gordon M. and Gebhardt, Günther, Derivatives Usage in Risk Management by Us and German Non-Financial Firms: a Comparative Survey (August 1998). NBER Working Paper No. w6705, Available at SSRN: https://ssrn.com/abstract=120888

Gordon M. Bodnar (Contact Author)

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-663-7731 (Phone)
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Günther Gebhardt

Goethe Universität Frankfurt am Main ( email )

Theodor-W.-Adorno-Platz 4
Hauspostfach 64
Frankfurt, 60629
Germany

HOME PAGE: http://much-magic.wiwi.uni-frankfurt.de/professoren/gebhardt/

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