Impact of Derivatives User on Firms' Performance of Shari'ah Compliant Firms

Abstract

The study examined the impact of derivatives usage on the performance of Shari'ah-compliant firms in Malaysia. The study employed a Generalised Method-of-Moment estimator (System-GMM) on a set of panel data from 2012 to 2017. A paired sample t-test for mean difference and a Wilcoxon Signed-ranks test was performed to examine the performance difference between users and non-users of derivatives. The study provided strong evidence of a significant difference in performance between users and non-users of derivatives. Moreover, the study observed better performance among derivative users than non-derivative users. The findings enriched the current Islamic financial market literature and contributed to a better understanding of the hedging activities among Shari’ah-compliant firms. The study offered new evidence on risk management using derivatives in the Islamic financial market. © 2023, Universiti Malaysia Sarawak. All rights reserved.