THE SIGNIFICANCE OF DERIVATIVES IN THE MANAGEMENT OF VALUE OF NON-FINANCIAL ENTERPRISES IN POLAND IN THE AGE OF FINANCIALIZATION

• Main Author: Rydzewska, Alina
• Format: Conference Proceeding
• Language: English
• Subjects: Capitalism; Corporate profits; Decision making; Derivatives; Economics; Financial instruments; Financial leverage; Financial statement analysis; Global economy; Hedging; Interest rates; International accounting standards; International trade; Investments; Prices; Profits; Risk levels; Securities markets; Short term; Stockholders; Value management
• ISSN: 1849-6903; 1849-6903

The turn of the 21st century is a period of growing importance of finance in the global economy. The domination of the financial sphere in relation to the real sphere is defined as financialization. Inflation of financial instruments, derivatives in particular, is indicated among the symptoms of financialization. Financialization in relation to companies is associated with the growing importance of financial motives in the decision-making processes of enterprises. The growing pressure of financial markets and investors forces transformations in the value management process. Companies raising capital from share issues are evaluated by investors (shareholders). In turn, management is entrusted to hired managers whose evaluation depends on the current results. In order to meet the requirements of the owners (shareholders), they stop taking into account the long-term development of a given undertaking and focus on achieving the required rate of return in the short term. Therefore, they limit their operational activities, and in particular long-term investment activities, in favour of short-term financial activities. They use derivatives as one of the forms of short-term profit generation. Their use is characterised by a relatively high level of risk resulting from the use of leverage in their construction. It also results in potential profits (or losses) many times higher than the capital employed. The purpose of this paper is to examine whether non-financial enterprises operating in Poland use derivatives in value management. The research was based on the analysis of indicators identifying the role of derivatives in the enterprise and determining their impact on the ROE ratio as a measure of value for shareholders. For this purpose, the financial statements of non-financial enterprises published in Poland by the Central Statistical Office for the years 2010-2017 were used.