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While companies have been using derivatives for many years, little has been known about the extent or pattern of their use because firms have not been required (until recently in the US, at least) to publicly report their derivatives activity. Unfortunately, the use of derivatives by companies only appears to receive attention in response to special cases of huge derivative related losses such as Barings, Procter&Gamble or Metallgesellschaft website.

The normal beneficial use of derivative instruments in the daily risk management activities of companies receives much less attention in the financial press. As a result, relatively little is known about the patterns of use or firms’ attitudes and policies regarding derivative use.

Recently, however, there have been several studies on the use of derivatives by US non-financial companies. Among these are the surveys of the Treasury Management Association (1996), Greenwich Associates (1996), and especially two large-scale surveys conducted by the Wharton School: one in 1994 (Bodnar, Hayt, Marston, and Smithson (1995)) and another in late 1995 (Bodnar, Hayt, and Marston (1996)). These studies have provided some insight into the use of derivatives for risk management and other purposes as well as reporting and control issues for US non-financial firms.

There have also recently been some studies on the use of derivatives by non-US companies. For example, Downie, McMillan, and Nosal (1996) survey Canadian firms, Yanagida and Inui (1995) survey Japanese firms, and Price Waterhouse (1995) surveys a set of large international firms on derivative usage and related issues. Given these studies of derivative usage in different countries, an interesting direction for further study is crosscountry comparisons of the patterns of and attitudes towards derivatives usage. However, careful comparison across surveys is typically hampered by the lack of comparability of the survey design and questions.