The Impact of Corporate Governance on Derivatives Usage–Empirical Evidence from African Non-Financial Firms

The study investigates the impact of corporate governance on derivatives usage in African non-financial firms. Using a sample of 760 African non-financial firms from 17 African countries, the study shows that derivatives usage among African non-financial firm is very low. The study finds that the main reasons why most African firms do not use Derivatives are lack of knowledge about derivatives, absence of organized derivatives market and absence of derivatives experts. The results also show that Board composition is the strongest measure of corporate governance impacting derivatives usage. Derivatives usage increases with increase in the number of executive directors but has an inverse relationship with the board size. Derivatives user firms have strong corporate governance in place to mitigate the risk of derivatives misuse that could hurt the firms.

http://dx.doi.org/10.9734/BJEMT/2015/15580