Proceedings of 8th Annual London Business Research Conference
Imperial College, London, UK, 8 - 9 July, 2013, ISBN: 978-1-922069-28-3
Effect of Exchange/OTC Derivatives Trading Volume on
Enterprise Value and Return on Assets According to
Economic Period: Focusing on Us Financial Institutions
Doojin Ryu, Jae-Seung Baek, Ji-Yoon Chae and Sang-Baik Kim
This study analyze the effect of exchange/over-the-counter (OTC) derivatives
trading volume of US financial institutions on enterprise value and return on
asset (ROA) and compared the analysis results by classifying the period into
before and after the financial crisis. As a result, we find that the increase in the
trading volume of OTC derivatives had a positive effect on enterprise value as
well as ROA in major US financial institutions before the financial crisis.
However, after the financial crisis, the increase in the trading volume of
exchange derivatives of these institutions improved the abnormal return (AR)
and the ROA. The result suggests that the increase in derivatives trading
volume has a different effect according to economic periods having different
market risks. Before the economic crisis when market risk is not so high, the
increase in trading volume of OTC derivatives has a positive effect on
enterprise value and ROA while after the economic crisis when market risk is
high, the increase in the trading volume of exchange derivatives has a positive
effect on such performances. Our result supports that the increase in trading
volume of exchange/OTC derivatives of major US financial institutions has a
different effect on the value enhancement and returns of financial institutions
depending on the market risk of each economic period.
JEL classification: G15, G32, G33, G34
Keywords: Derivatives Trading Volume, Financial Institutions, Enterprise Value, ROA
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Doojin Ryu, Department of Economics, Chung-Ang University, Korea.
Jae-Seung Baek, Department of International Business, Hankuk University of Foreign Studies, Korea.
Tel: 82-31-330-4936, Fax: +82-31-330-4074, E-mail: jbaek@hufs.ac.kr
Ji-Yoon Chae, Financial Economy Institute & Department of International Business, Hankuk University
of Foreign Studies, Korea.
Sang-Baik Kim, Department of International Business, Hankuk University of Foreign Studies, Korea.