The Use of Derivatives in Nordic Firms

We contribute to the previous literature on the use of derivatives by studying separately the determinants for profit seeking versus hedging in a sample of firms from four different Nordic countries. While the hedging motive clearly dominates, more than half of the firms in our sample give some weight for additional income as a motive for the use of derivatives. Combining survey data on the use of derivatives with financial variables, data on management and blockholder ownership, as well as data on firm level diversification, we find that very different determinants drive the use of derivatives for these two motives. Firm level diversification is negatively related to hedging, but positively to the use of derivatives for additional income. Financial firms use derivatives more for profit than for hedging