臺灣博碩士論文加值系統

With further liberalization of Taiwanese financial market since the early 1990s, the financial intermediaries have more exposed themselves to higher capital market risks, such as currency and interest rate fluctuations. On-balance sheet hedging instruments available to managers could not be employed to effectively minimize firm risk, while the derivatives hedging devises provide alternative ways of managing risks arising from various types of price movements. In the recent past, the dramatic surge in the trading volume of off-balance-sheet contracts suggests that the derivatives instruments are widely used for reducing firm-specific risk. Therefore, it would be noteworthy to examine the motivation for and the influence of derivatives hedging.
This thesis consists of two chapters. In the first chapter, due to the availability of market information on firm value and the derivatives data provided by the Central Bank, we identify the above mentioned issues through the probit and panel regressions using a panel database of 934 bank-quarter observations. Based on the first model results, we find that banks exposed to higher interest rate and currency risks are more likely to use derivatives for risk management. Firm size and holding company affiliation also affect banks’ participation in derivatives activities. Further, we evidence that the unaffiliated bank, albeit with a higher tendency to use derivatives, has lower involvement in the extent of derivatives hedging since the derivatives market is dominated by the affiliated banks that face risk exposures great enough to make derivatives activities worthwhile. Debt-constrained banks relying on preferred stock financing are found to use derivatives to hedge against potentially financial distress costs. In addition, we also find that the diversification of cash flows from operating activities and the diversified portfolio in long-term investment and debt positions seem to serve as substitutes for hedging. The results obtained from the second model are consistent with the findings of prior literature. The use of derivatives for risk reduction is weakly supported in our study by the extent of participation in interest rate-related contracts. However, as evidenced by the positive relationship, banks’ participation in currency derivatives might be speculative and slightly enhance the level of total risk and unsystematic risk.
The second chapter investigates the factors affecting insurers’ decision to hedge with derivatives instruments and the relationship between insolvency risk and the use of derivatives during the 2001-2003 period. Using the cross-sectional and panel estimation techniques, the firm-specific determinants of hedging are found to change from one epoch to another. The overall results from the first model indicate that the decision to participate in derivatives activities would not necessarily consistent with the decision on the extent of usage. We provide evidence of statistically significant relationship between derivatives usage and various proxies for scale economies and currency exposure. Our analysis of the second model suggests that the hedging activities have no significant effect on default risk facing by the insurers with the exception of volume decision in the non-life insurance firms. The risk reduction effect found in the non-life sector is significant after controlling for a number of risk-related factors that are indirectly associated with the derivatives hedging decisions.

Anatomy of the risk-averse behavior: Empirical evidence from the Taiwanese banking industry …………………………………………….…….. 1

1. Introduction ……………………………………………………………………... 1

2. Data ……………………………………………………………………………... 4
2.1. Data sources and sample formation process …………………………………... 5
2.2. Potential biases inherent in sample construction …………………...….……… 8
2.3. The derivatives practice in Taiwanese banking sector ………………………... 9

3. Methodology …………………………………………………………………... 14
3.1. Model development ………………………………………………………….. 14
3.2. Empirical predictions ……………………………………………….……….. 17
3.2.1. Theoretical rationales for hedging activities ………………………………. 18
3.2.1.1. Expected costs of financial distress ……………………………………… 19
3.2.1.2. Agency costs ……………………………………………………………... 21
3.2.1.3. Taxes ……………………………………………………………….…….. 22
3.2.2. Managerial motives ………………………………………………………... 22
3.2.2.1. Managerial risk aversion ………………………………………………… 22
3.2.2.2. Corporate governance ……………………………………………………. 24
3.2.3. Avoidance of observable risks ……………………………………………... 26
3.2.4. Ability to involve in derivatives market ………………………………….... 27
3.2.5. Alternatives to derivatives instruments ……………………………………. 29
3.2.6. Derivatives hedging against firm risk ……………………………………... 30
3.3. Summary of empirical hypotheses …………………………………………... 33
3.4. Empirical model …………………………………………………...………… 34
3.4.1. Determinants model ……………………………………………………….. 34
3.4.1.1. Participation decision ……………………………………………………. 35
3.4.1.2. Transaction volume decision …………………………………………….. 36
3.4.2. Risk model …………………………………………………………….…… 38
3.4.2.1. Effect of participation decision ………………………………………….. 38
3.4.2.2. Effect of transaction volume decision …………………………………… 40
3.4.2.3. Marginal effect of transaction volume decision ……………………...….. 40
3.5. Robustness checks …………………………………………………………… 42

4. Results …………………………………………………………………………. 43
4.1. Descriptive characteristics …………………………………………………… 44
4.2. Univariate analysis ………………………………………………………… 44
4.2.1. Risk indicators ……………………………………………………………... 45
4.2.2. Firm characteristics ………………………………………………………... 45
4.3. Multivariate analysis ……………………………………………………….... 46
4.3.1. The determinants model …………………………………………………… 47
4.3.1.1. Results of participation decision model ………………………………… 47
4.3.2. Tests of endogeneity ……………………………………………………….. 55
4.3.2.1. Results of the Hausman test ……………………………………………... 55
4.3.2.2. Results of the Granger causality test …………………………………….. 55
4.3.3. Multivariate analysis: the risk model ……………………………………… 56
4.3.3.1. Results of participation decision model …………………………………. 56
4.3.3.2. Results of volume decision model ……………………………………….. 56
4.3.3.3. Results of marginal effect model ………………………………………… 57
4.4. Possible caveats …………………………………………………………….... 58

5. Conclusion ……………………………………………………………………... 59


Derivatives usage and insolvency risk: Evidence from the Taiwanese insurance industry ………………..…………………………………………… 62

1. Introduction ……………………………………………………………………. 62

2. Literature review and hypothesis development ………………………………... 64
2.1. Motivations of derivatives activity …………………………………………... 64
2.1.1. Firm size …………………………………………………………………… 64
2.1.2. Financial distress …………………………………………………………... 65
2.1.3. Mismatch of asset and liability durations ………………………………….. 65
2.1.4. Growth opportunity …………..…………………………………………… 66
2.1.5. Reinsurance ……..………………………………………………………… 66
2.1.6. Tax …………………………………………………………………………. 67
2.1.7. Institutional ownership …………………………………..………………… 67
2.1.8. Managerial ownership ……………………………………………………... 67
2.1.9. Foreign exchange risk ……………………………………………………... 68
2.1.10. Interest rate risk ……..……………………………………………………. 68
2.1.11. Sale of investment-linked insurance ……..……………………………….. 68
2.1.12. Yield of capital utilization ………………………………………………... 68
2.1.13. Alternative substitutes ……………………….…………………………… 69
2.1.14. Domestic firms …………………………………………………………… 69
2.1.15. Concentration of claim payments ………………………………………… 69

3. Research design ………………………………………………………………... 70
3.1. Sample construction …………………………………………………………. 70
3.2. Methodology ………………………………………………………………… 70

4. Empirical results ……………………………………………………………….. 72
4.1. Descriptive characteristics …………………………………………………… 72
4.2. Univariate results …………………………………………………………….. 72
4.3. Multivariate results: the motivations model …………………………………. 73
4.3.1. Results of participation decision model …………………………………… 73
4.3.2. Results of participation extent model ……………………………………... 76
4.3.3. Comparing results of probit and panel analysis estimation ……………... 77
4.4. Tests of endogeneity …………………………………………………………. 78
4.4.1. Hausman test ………………………………………………………………. 78
4.5 Multivariate results: the risk model ………………………………………… 79
4.5.1 Results of participation decision model …………………………………… 80
4.5.2. Results of participation extent model ……………………………………… 81

5. Conclusion ……………………………………………………………………... 81

Appendix A ……………………………………………………………...………... 84

References ……………………………………………………………...……….... 86

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