However, controlling for this country effect, the general pattern of usage across industry and size is very comparable, suggesting that the general tendency to use derivatives is driven by economic issues such as operational activities and firm characteristics. While firms in both countries overwhelmingly indicate that they use derivatives mostly for risk management, differences appear in the primary goal of using derivatives, with German firms focusing more on managing accounting results whereas US firms focused more on managing cash flows

German firms are more likely to incorporate their own market view on price movement when taking positions with derivatives than US firms. Despite this, German firms are also more relaxed about derivatives, indicating a significantly lower level of concern about issues related to derivatives than US firms. This attitude is consistent with the German firms’ consistently stricter attitudes and policies towards controlling derivatives activities within the firm.

The remainder of the paper is organized as follows. The next section discusses the samples for each survey and reports on the overall use and non-use of derivatives. Section III compares the responses to detailed questions regarding derivative use and attitudes towards derivatives in each country.

Sections IV, V, and VI compare derivative usage across the two countries in the areas of foreign exchange, interest rates and commodities, respectively. Section VII examines responses to question on corporate policies on control and reporting for derivatives, and Section VIII concludes.