Financial Derivatives and Bank Risk: Evidence from D-8 Countries

Abstract

Öz Purpose: The study aims to investigate the impact of financial derivatives use on bank risk. For this purpose, the banks operating in D-8 countries, are investigated. Design/Methodology: While the relationship between the bank risk and derivative utilize is examined, some of the bank-specific control variables are added to the model. Due to the sample structure and endogeneity problem in the study, hypotheses were tested again by using Generalized Moments Method. Findings: The analysis results showed a statistically significant and negative relationship between financial derivative use and bank risk and using financial derivatives is reduced the bank's risk. Limitations : From D-8 countries, Iran and Bangladesh were excluded from the study because of the inaccessibility of the data related to the financial derivatives. Originality/Value : While the relationship between "Banking Risk and Use of Derivative Financial Instruments" in the literature is mainly tested in developed countries, there is a gap in the literature on how this relationship is in developing countries. This study aims to contribute to the literature by revealing the relationship between the use of financial derivatives and bank risk in D-8 countries, which are classified as developing countries. banks whose data were D-8 in the The dependent variable, Z-score; The independent variables consist of a derivative and bank-s pecific control variables. System GMM method was used to estimate the model of the