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TABLE OF CONTENT

No.

Particular

1.0

Table of content

2.0

Introduction of the articles


a. Title of the article/journal, researcher name, date of
published
b. Journal information/background
c. Identify the purpose of the article.

3.0

Summary of the articles

4.0

a. Abstract summarizing the articles


Critical Review
a.
b.
c.
d.
e.

4.1

The Problem
Review of the Literature
Design and procedures
Data Analysis and presentation
Conclusions and Implication

Critical Review
a. The Problem
b. Review of the Literature

5.0

c. Design and procedures


d. Data Analysis and presentation
e. Conclusions and Implication
Recommendation
a. What is your overall assessment of the journals?
b. Make a final judgement on the value of the article.
c. State what you have learned from the article.
d. Comment on the future or implication of the research.

INTRODUCTION OF THE ARTICLE

Page

First journal
The Price Discovery of the Malaysian Crude Palm
Oil Futures Markets
Nik Muhammad Naziman Ab Rahman1, Abdol Samad Nawi2 and
Yusrina Hayati Nik Muhd Naziman
Journal of Applied Finance & Banking, vol.2, no.4, 2012, 25-47
ISSN: 1792-6580 (print version), 1792-6599 (online)
Scienpress Ltd, 2012
Second journal

The Determinants of Derivative Usage: A study on Malaysian firms


Noor Azizah Shaari*, Nurfadhilah Abu Hasan, Yamuna Rani Palanimally &Ramesh
Kumar Moona Haji Mohamed, Faculty of Business & Finance, UTAR.
JUNE 2013 VOL 5, NO 2

b) JOURNAL BACKGROUND
First journal
Commodity futures trading was formally introduced in Malaysia in October 1980 with two major
purposes. Firstly, is to provide an efficient price discovery mechanism. Secondly, is to provide
hedging facilities to market participants against the vagaries of price fluctuations. Prices of
agricultural product have been found to be particularly volatile and susceptible to sharp
fluctuations which expose producers and traders to increased risk in handling these products.
Palm oil is currently the second most important vegetable oil in the world oils and fats market,
accounting for 14.35% of world production of seventeen major oils and fats, ranking only behind
soybean oil, which contributed 20.23% of world output. In terms of world exports of oils and fats,
palm oil is currently leading with a market share of 32% while soybean oil has share of 16.2%.
Palm oil and palm kernel oil have become the production growth leaders in the oils and fats
complex since the early seventies (Mielke, 1991).
Second journal

Derivatives became a hot topic during that period and a lot of researchers started to conduct
studies to further investigate the factors and impacts of the derivatives in the market of
developed countries. Derivatives are securities where price is derived from one or more
underlying assets; it serves as a contract between two or more parties. The most common types
of derivatives are future contracts, forward contracts, options and swaps. Derivatives play an
important role in helping companies to manage risk of the interest rates, currency exchange
rates, and equity markets. For example, a company that owes a large amount of debt at a
variable and the interest rate will be locked in its debt at a fixed rate, the company may enter a
derivative contract that will allow it to swap interest rates with those companies that are seeking
to switch from a fixed to a variable rate. Derivatives also can also be used for speculative
purposes to earn profits. The use of derivatives and the cost of equity is closely related. The
researchers evidences that firms used derivatives to reduce their financial distress in the market
and they use derivatives to hedge rather than to speculate in the foreign exchange market (Gay,
2011).
c) PURPOSE OF THE ARTICLE
First journal

The purpose of the article is investigates the market efficiency of the Malaysian crude
palm oil prices using data for the sample period spanning from 1998:01 2010:12.
Second journal
This current research study is to investigate the factor that influences derivative usage in
Malaysia firms as there is not much research being done in the Malaysian market

3.0 SUMMARY OF THE ARTICLES

First journal
This paper investigates the market efficiency of the Malaysian crude palm oil prices using data
for the sample period spanning from 1998:01 2010:12. The uni variate unit root test confirms
that all series are non-stationary in their levels. The Johansen multivariate test provides
empirical evidence for spot and futures prices are co-integrated. This implies that the market
efficiency hypothesis can be easily rejected. The Error-Correction Model (ECM) also shows that
there is a dynamics relationship between spot and futures prices. This provides further evidence
that the crude palm oil prices do possess the price discovery function.

Second journal
Derivatives play an important role in helping companies to manage risk of the interest rates,
currency exchange rates, and equity markets. This current research study is to investigate the
factor that influences derivative usage in Malaysia firms as there is not much research being
done in the Malaysian market. This study is aimed to determine derivative usage in the
Malaysian corporation by using a sample of 97 non-financial firms over the period of the period
2010 and 2011 after the filtering process. The research used secondary data and focused on
the quantitative approach. From the regression results, this study conclude that the number of
shareholding by the director, dividend payout ratio and debt to equity ratio have no significant
impact on derivative usage. The number of shareholding will not be the same with the previous
researchers results. Practically, firms are required to reduce the risk exposed to them via
hedging as they are involved in a larger and international business trading. Any little changes in
the market will cause the firm to suffer huge losses as they are involved in a huge amount of
business transaction. This study suggests that the future researcher should clearly define which
ratio being used to be the most appropriate to measure the changes in the main variables.
Future researcher may implement the others financial ratio analysis based on the country they
are going to investigate on derivative usage.

Article 1

4.0 The Critical Review


4.0.1 The Problem
This article shows that discovery of the price of the Malaysian crude palm oil in future market.
The volume of crude palm oil futures on the Kuala Lumpur Commodity Exchange (KLCE) or
now on MDEX is scarcely more than the engenderment of the Malaysia palm oil. As the price of
a palm oil is dependent on its consumption and the calibre of the stock, it is consequential to
analyse these two variables simultaneously. The world stock or utilization of palm oil customarily
higher than that of Malaysia, not only because of the astronomically immense stocks in
transhipment centers such as Singapore and Rotterdam, but withal because of some
consuming countries prefer to keep relatively sizably voluminous stocks. Other than that, for
countries like Malaysia which now depend on commodity earnings for a substantial portion of
their inflow of peregrine exchange astringent fluctuations in prices could have inauspicious
effects on the economy. The key feature of future markets is their ability to prognosticate prices
at a categorical future date both efficiently and in impartial fusion. Thus an empirical analysis of
efficiency and impartialness is central to any assessment of the value of future markets. The
purpose of this study is to know the market efficiency of the Malaysian crude palm oil prices
using data for the sample period spanning from 1998 to 2010. This is where they did the
univariate unit root test to confirms that all series are non-stationary in their levels. The
Johansen multivariate test provides empirical evidence for spot and futures prices are cointegrated. This implies that the market efficiency hypothesis can be easily rejected. The ErrorCorrection Model (ECM) also shows that there is a dynamics relationship between spot and
futures prices. This provides further evidence that the crude palm oil prices do possess the price
discovery function. The Efficient Market Hypothesis describes an efficient market as one which
consistently incorporates all information in determining prices. The three assumption of efficient
market hypothesis are that there are no transaction costs, information is costless available to all
market participants, the implications of current information for both the current price and
distributions of future prices are accepted by all market participants. The key terms such as
market efficiency, price discovery, hedging, co-integration.

4.0.2 Review of the Literature

There has been substantial empirical work, which has investigated the efficiency issue by
testing the random walk model. The review is considered too broad. The reference is recent
which emanates from past few years. Based on the previous research, most of the studies
found some evidence of serial correlation in futures prices in the short-run, but the evidence is
not strong, and the result depend heavily on the technique as well as the sample period of the
studies. The researcher review the previous researches which elaborated the utilization of cointegration for exploring the efficiency in futures market as it provides predictive signal on price
convergence. The co-integration between the spot price and futures price is an indispensable
condition for market efficiency. It ascertains that there subsists a long-run equilibrium
relationship between the two series. The absence of co-integration implicatively insinuates that
futures prices provide little information about kinetics in cash price, denoting that a futures
market is not very efficient. The same approach has been utilized in the current study. After
exploring the subsistence of co-integration between futures and spot prices, it is imperative to
test the causality to assess the direction of relationship. In the previous study, Granger causality
test has been used to assess the direction of relationship between futures and spot prices.
Other than that, the researchers have examined five major international traded oils which are
coconut, palm, palm kernel, soybean and sunflower to investigate the price interrelationships in
the vegetable and tropical oils market whether they are co-integrated or not. One of the
researcher has investigate the long-run stochastic properties of informational linked futures
contracts in diverge groups such as soft commodities, grain and oil seeds, livestock, precious
metals, energy, foreign currencies, and interest-rate instruments. Using the Phillips-Perron test
for unit root and Johansens test for co-integration to analyse the monthly data covers the period
July 1986 through March 1995. The results showed that most futures in the sample exhibit the
presence of non-stationarity. The test for co-integration within groups provides strong evidence
for soft commodities, precious metals, energy, and short-term interest rates. Weaker evidence
for grains and oil seeds and livestock while foreign currency and long-term interest rate futures
show evidence of segmentation.

4.0.3 Design and procedures


The researcher used secondary data and focus on the quantitative approach. Quantitative
research is the systematic empirical investigation of observable phenomena via statistical,
mathematical or computational techniques. This is a replica study where there is already
paperwork on this topic. There are several unit root tests available in the literature to determine
the order of integration of the individual series. However, the most widely used methods are
Augmented Dickey Fuller test (ADF). After determine the order of integration of each series, the
next step is to test for co-integration relationships among the series. The Johansen-Juselius is
based on maximum-likelihood estimation is designed to test a number of linearly independent
co-integrating vectors existing among the variables. The model also utilises the likelihood ratio
test statistic that has an exact limiting distribution, which can be used to estimate co-integration
relationships among a group of two or more variables.

Unit Root Test and Orders of Integration


The prerequisite condition for the series to be co-integrated is that the series must have the
same order of integration. The order of integration of a series is determined by the number of
times that the series must be difference before achieving stationary.

Johansen-Juselius Multivariate Co-integration Test


Once we determine the order of integration of each series, the next step is to test for cointegration relationships among the series. The Johansen-Juselius is based on maximumlikelihood estimation is designed to test a number of linearly independent co-integrating vectors
existing among the variables. The model also utilises the likelihood ratio test statistic that has an
exact limiting distribution, which can be used to estimate co-integration relationships among a
group of two or more variables. Johansen-Juselius approach over E-G approach is that the
procedure allows testing for linear restriction on the co-integrating parameters. The test statistic
in the Johansen and Juselius also can be compared to known critical values.

Granger Causality and Vector Error Correction Model (VECM)


There is several causality degrees, which were proposed by Granger (1969) as widely used in
the literature.

Unilateral

Feedback or bi-directional

Independence

The Data
There are two variables required for the spot price and futures price. The futures price is the
futures contract at 14 days, one month, two months and three months before maturity. Each
futures contract will mature at the 15th of each month and if 15th is a non-market day, the
preceding business day is selected. There is only one contract for each month and thus for
every month, only one futures contract will mature.

They have conducted the pilot study where they analysed the price of the crude palm oil from
the year 1998 2010. For each of these tests, two equations have been estimated, one with
constant and no trend and second with constant and time trend. The sampling is where they
chose short-run and long-run. Short-run market causality test will determine whether spot price
in different markets respond instantaneously to changes in future prices. The coefficient of the
lagged error correction term shows the portion by which the long-run disequilibrium in the
dependant variable is being corrected in each short period to have stable long-run relationship.

4.0.4 Data Analysis and presentation


The data was analyzed using unit root test and orders of integration which was proposed by
Said and Dickey (1984) and Phillips and Perron test (PP) by Phillips and Perron (1988),
johansen-juselius multivariate co-integration test, and granger causality and vector error
correction model result shows that the Error-Correction Model (ECM) is much to do with the
nature of time-series data and meeting the non-stationary requirements and limitations in using
co-integration test and Error-Correction Model (ECM) in analyzing efficiency in commodity
futures markets, these techniques provide useful understanding of futures trading system in
Malaysia. The data is known as quantitative where because the data have been analyzed
statistically.

The findings in this study are subsidiary for sundry stakeholders active in

agricultural commodities markets such as engenderers, traders, commission agents, commodity


exchange participants, regulators and policy makers. The direction of relationship between
futures and spot prices show that in general, the direction of causality is more vigorous for
futures prices to spot prices in case of Malaysian crude palm oil, suggesting futures prices
incline to affect spot prices in the short run. Predicated on the analysis, it can be concluded that
albeit futures markets play more preponderant role in the price revelation process, the price
revelation in spot markets still subsist for some of the commodities in the short run. Evidence of
co-integration does not imply the direction of causality among variables in the system and does
not distinguish between short term and long term causality. We extend the analysis by using a
five-dimensional vector error-correction modelling (VECM) to gain some insights into the shortrun and long-run lead-lag causal relationships between price series.

4.0.5 Conclusions and Implication


As the conclusion of the study, the sustainability of agricultural commodity futures markets
depends on the transparency and efficiency of its functioning in terms of price revelation, price
risk management, and flexible contact designation, controlling inequitable notional theorization,
commodity distribution system and coverage, infrastructural support and others. Meanwhile, in
this study, Johansen multivariate co-integration test and Error- Correction Model (ECM) was
used to examine the market efficiency hypothesis. Firstly, the results suggest that each price
series is non-stationary in levels but stationary in first difference. This indicates that the crude
palm oil spot and future prices are integrated of order one. Secondly, the spot and futures prices
of crude palm oil are co-integrated. This implies that the crude palm oil prices are tied together
in a long-run equilibrium relationship. Finally, Error-Correction Model (ECM) is used to study the
dynamics relationship between spot and futures prices. The result shows that changers in the
lagged crude palm oil future prices do effectively influence changers in the spot price.

The most paramount implicative insinuation is that a good price transmission system is essential
to ascertain that future prices do not diverge from fundamentals. The futures market has to be
proximately cognate to authentic demand and supply conditions in order for futures prices to be
good are speakers for the maxima market. Therefore the regime should take great care on the
policy of replanting of palm oil trees, so that the engenderment of crude palm oil can be
enhance to reflect the price of the crude palm oil.

Article 2

4.1 CRITICAL REVIEWS


4.1.1 The problem
Derivatives became a hot topic during that period and a lot of researchers started to conduct
studies to further investigate the factors and impacts of the derivatives in the market of
developed countries. Derivatives are securities where price is derived from one or more
underlying assets; it serves as a contract between two or more parties. The most common types
of derivatives are future contracts, forward contracts, options and swaps. Derivatives play an
important role in helping companies to manage risk of the interest rates, currency exchange
rates, and equity markets. This current research study is to investigate the factor that influences
derivative usage in Malaysia firms as there is not much research being done in the Malaysian
market. The research used secondary data and focused on the quantitative approach.
Derivatives play an important role in helping companies to manage risk of the interest rates,
currency exchange rates, and equity markets. This current research study is to investigate the
factor that influences derivative usage in Malaysia firms as there is not much research being
done in the Malaysian market. This study is aimed to determine derivative usage in the
Malaysian corporation by using a sample of 97 non-financial firms over the period of the period
2010 and 2011 after the filtering process. The research used secondary data and focused on
the quantitative approach. From the regression results, this study conclude that the number of
shareholding by the director, dividend payout ratio and debt to equity ratio have no significant
impact on derivative usage. The number of shareholding will not be the same with the previous
researchers results. Practically, firms are required to reduce the risk exposed to them via
hedging as they are involved in a larger and international business trading. Any little changes in
the market will cause the firm to suffer huge losses as they are involved in a huge amount of
business transaction. The key terms such as financial distress, investment growth, managerial
ownership, liquidity, profitability and derivatives usage are clearly defined.

4.1.2 Review of the literature

The cited sources are relevant to the study. The review is considered too broad. The reference
is recent which is from past few years. There is no evidence of bias in this journal. Based on
previous research, it was found that derivative usage is affected by the debt, investment growth,
managerial ownership and liquidity. While, leveraged, debt to equity, capital expenditure,
dividend payout, number of shareholding, current ratio and quick ratio, ROA and ROE as a
proxy variable. The review seems to be good with the proper explanation and definition together
with the chart and so on. The review is considered too broad because of a lot of factors to be
determined. The factor is such as:
Debt
A firm with a higher debt means that the firm is facing the risk of financial distress. In other
words, the firms would be likely to default on loan when borrowing more from creditors.
Therefore, derivatives could play a very important part in helping the firm to deal with its
competitive financial environment. In most of the previous research work, debt is proxy by
leverage and debt to equity.

Proxy Variable: Leverage


Leverage is the proxy to measure the corporates debt. While, some of the companies might be
using debt to finance operations by increase the leverage without increase its equity to make an
investment.

Proxy Variable: Debt to equity ratio


The debt to equity ratio is the proxy of corporate debt. It is a very simple and popular of debt
valuation indicator to measure the ability of the company to repay its debt obligation over its
equity. However, the company might have a tendency towards bankruptcy if it uses debt in
access than its own financial sources to finance its business due to the cost of debt financing
and thus, end up leave nothing to the shareholder.

Investment growth

Shortfall cash may cause the firm to decrease the investment opportunity. Firms may engage in
derivatives to avoid underinvestment problems and earning fluctuation by minimizing the risk in
order to enhance the investment opportunity.

Proxy Variable: Capital expenditure


The capital expenditure is the proxy of investment growth. Companies try to upgrade and
improve their long term assets in every year.

Proxy Variable: Dividend payout


The dividend payout is one of the proxy to measure the growth opportunity. Dividend is the
payment of the companies which made out from its business earning to the investor.

Managerial Ownership
Managerial ownership may influence the decision of hedging in a firm. Generally, the larger
firms are more likely to exercise the derivatives instruments.

Proxy Variable: Number of Shareholding


Number of shareholding is one of the proxies in managerial ownership.

Liquidity
Liquidity, the ratio of cash and cash equivalents to firm size, is one of the independent variables
of derivative usage, which spells a firms ability to payback its short-terms debts obligations.

Proxy Variable: Quick Ratio

Quick ratio is one of the proxies of liquidity. A firm with higher quick ratio means that the firm has
liquidity and is able to meet current obligations.

Proxy Variable: Current Ratio


Current ratio is the proxy to measure the liquidity of a firm.

Profitability
Profitability is playing an important role in all businesses, it shows a firms overall efficiency and
performance, and concerned its return to its investors.

Proxy Variable: Return on Asset (ROA)


Return on asset (ROA) is the proxy to measure profitability.
Proxy Variable: Return on Equity (ROE)
Return on equity (ROE) is one of the proxies used to measure profitability.

4.1.3 Design and Procedure

This study is aimed to determine derivative usage in the Malaysian corporation by using a
sample of 97 non-financial firms over the period of the period 2010 and 2011 after the filtering
process. The research used secondary data and focused on the quantitative approach. It is
known as the replica study. This study had been using different kinds of measurement to
determinate the use of derivatives. This research had been filtered out from 826 non-financial
firms into 97 firms which are applying derivatives in their firm for the period 2010-2011. In March
2008, Financial Accounting Standard Boards (FASB) had issued statement no. 161 on the
derivatives usage of a firm (Financial Accounting Standards Board, n.d.). All listed firms were
required to disclose the purpose of derivative usage and the amount of derivatives hedge or
speculate, effective 15 November 2008. Therefore, firms will be classified as derivatives users if
their do disclose the derivatives usage in their annual reports. The 97 non-financial firms were
selected based on the disclosure of derivatives in their annual reports over the period of 20102011 in Malaysia. After obtaining the 97 non-financial firms, this research started to analyze the
97 firms either via annual reports or other source for independent data. Yes, there is a pilot
study conducted. The variables is known as debt, Proxy Variable: Leverage Ratio , Proxy
Variable: Debt to Equity Ratio , Investment Growth , Proxy Variable: Capital Expenditure Ratio ,
Proxy Variable: Dividend Payout Ratio , Managerial Ownership , Proxy Variable: Number Of
Shareholding , Liquidity , Proxy Variable: Current Ratio , Proxy Variable: Quick Ratio ,
Profitability , Proxy Variable: Return On Asset Ratio and Proxy Variable: Return Of Equity Ratio.
The meaning of the sampling is known as:
Debt
It is easier for a company to get into debt than to get out of debt. Debt acts as a liability to the
company.

Proxy Variable: Leverage Ratio


Leverage ratio shows the ability of the company to meet with its financial obligation. A company
with a higher level of leverage ratio indicates that the company is using more debt than equity.

Proxy Variable: Debt to Equity Ratio

Debt to equity ratio acts as an indicator to measure the ability of the company to repay its debt
obligation over its equity.

Investment Growth
When the company shows a promising emerging investment growth, the investor would have
confidence to invest.

Proxy Variable: Capital Expenditure Ratio


Capital expenditure ratio shows the cash that the company is spending to upgrade its asset or
expand its business to improve with its current situation.

Proxy Variable: Dividend Payout Ratio


Dividend payout ratio show that the stability and health of the company by measuring its earning
from investment and paying to its investor in terms of dividend.

Managerial Ownership
When the firm group the manager as a part of the owner by giving share to the manager, this is
for the purpose of ensuring the manager to act in the best interest for the firm in maximize the
shareholder wealth.

Proxy Variable: Number of Shareholding


The number of shares which are held by the manager is one of the methods to encourage the
manager to have the same goal with the firm to maximize the shareholder wealth.

Liquidity

Company should have more capital for investment or any spending in business.

Proxy Variable: Current Ratio


Current Ratio shows the ability of a company to pay off its short term liability with the current
asset that can be easily changed into cash.

Proxy Variable: Quick Ratio


Quick Ratio is the same measure as the current ratio which examines the ability of a company
to pay the short term liability by selling its current asset to obtain credit.

Profitability
Before the investor put their money into the company, they will analyze whether the company is
using its asset efficiently and manage its operation effectively in generating the earning.

Proxy Variable: Return on Asset Ratio


Return on asset ratio acts as an important role to measure the efficiency of the company in
using its asset to generate for the profit.

Proxy Variable: Return of Equity Ratio


Return on equity ratio is an indicator to measure how the company is using its funds such as
shareholder fund to generate earning from investment.

4.1.4 Data Analysis and presentation

The data was analyzed using normality test result shows that the error term is not normality
distributed. The data is known as quantitative where the use of derivatives on the sample of 826
Malaysia non-financial firms over the period 2010 and 2011. From the regression results, this
study conclude that the number of shareholding by the director, dividend payout ratio and debt
to equity ratio have no significant impact on derivative usage. The number of shareholding will
not be the same with the previous researchers results. Smith and Stulz (1985) found that there
is a positive relationship between management shareholdings and the use of derivatives.
Geczy, Minton and Schrand (1997) found out that there is a negative relationship between
dividend payout ratios with the derivative usage. This shows that there is consistent result of the
dividend payout ratio with the previous researcher. Allayannis and Weston (2001) found that
debt to equity ratio have a positive and significant relationship with derivative usage. From the
regression result, the debt to equity ratio is not consistent with the previous researcher result.
This is due to the debt to equity that will not affect the derivative usage using by the firms. In
terms of other explanatory variables, capital expenditure has a strongly significance related to
the derivative usage. For leverage ratio, current ratio, quick ratio, ROA and ROE will be
significantly to the derivative usage.
Therefore, this study made a conclusion for the hypotheses that were developed in chapter 3:
1. Leverage: Reject H0, leverage has a positive and significant relationship with derivative
usage. There is evidence that shows leverage is positively related to derivative usage.
2. Debt to equity: Reject Ho, debt to equity ratio have a positive and significant relationship with
derivative usage. However, the result in this study shows that there should not reject Ho, there
is no evidence to conclude that debt to equity is positively related to derivative usage.
3. Capital expenditure: Reject Ho, capital expenditure has a positive significant relationship with
derivative usage. There is evidence that shows capital expenditure is positively related to
derivative usage.
4. Dividend payout ratio: Do not reject Ho, dividend payout ratio have a negative and
insignificant relationship with derivative usage. However, the result in this study shows that there
should not reject Ho, there is no evidence to conclude that dividend payout ratio is negatively
related to derivative usage.
5. Number of shareholding: Reject Ho, number of shareholding has a positive and significant
relationship with derivative usage. However, the result in this study shows that there should not

reject Ho, there is no evidence shows that dividend payout ratio is positively related to derivative
usage.
6. Current Ratio: Do not reject Ho, current ratio has a negative and insignificant relationship with
derivative usage. There is evidence shows that current ratio is negatively related to derivative
usage.
7. Quick Ratio: Do not reject Ho, quick ratio has a negative and insignificant relationship with
derivative usage. There is evidence shows that quick ratio is negatively related to derivative
usage.
8. Return On Asset Ratio (ROA): Do not reject Ho, ROA ratio has a negative and insignificant
relationship with derivative usage. There is evidence shows that ROA is negatively related to
derivative usage.
9. Return On Equity Ratio (ROE): Do not reject Ho, ROE ratio has a negative and insignificant
relationship with derivative usage. There is evidence shows that ROE is negatively related to
derivative usage.

From the results, most of the proxy variables have significance to the previous researcher
result. First and foremost, the sample size of this study is relatively small whereby only 97 of the
companies meet the selection criteria from 826 of financial and nonfinancial companies which
are listed in the Bursa Malaysia, Main Market. This study excluded the commercial banks by
selecting the non-financial companies based on the notional amount of derivative contract use.
Starting from 2008, Malaysia Derivative Exchange had been announced as a comprehensive of
derivative disclose requirement with the purpose of requiring all of the listed companies to
disclose their derivative contract in financial reports. However, some of the companies do not
behave in conformity with the law. This study found that some of the companies do not provide
detail on their annual report. While, some of the companies never even provide any information
regarding to use or not to use in derivative.

4.1.5 Conclusions and Implication

The conclusion of study is related to its original purpose. Based on the results, it was discovered
that some of the independent variables are significant with dependent variables and some are
not. For example, the proxy variables of profitability such as ROA and ROE are having a
positive relationship with the derivative usage of Malaysian corporation, which means that the
profitability of a firm will affect the derivative usage. Meanwhile, the managerial ownership is
insignificant to derivative usage. The result and conclusion will affect the derivatives because it
plays an important role in against the risk exposure in the possibility of getting losses from the
business environment. The recommendation that is made is to provides a better understanding
of the relationship among each of the variables such as debt, investments growth, managerial
ownership, liquidity and profitability influence to the use of derivatives in the corporation.

Recommendation

The overall assessments for these journals are to help us synthesize course concepts and apply
them to research in Investment issues. This cans be accomplished by answering some
questions and then writing a short review or critique of the published research. To learn how to
imply derivative markets in daily investment contract and processes. Form the first article, which
is The Price Discovery of the Malaysian Crude Palm Oil Futures Markets, where the researcher
analyzes the price from 1998 to 2010. The researcher have shown it by testing in different way

and reported statistically. Meanwhile, from the second journal, which is The Determinants of
Derivative Usage: A study on Malaysian firms, where the derivative market plays an important
role in helping companies to manage risk of the interest rates, currency exchange rates, and
equity markets. This study suggests that the future researcher should clearly define which ratio
being used to be the most appropriate to measure the changes in the main variables. Future
researcher may implement the others financial ratio analysis based on the country they are
going to investigate on derivative usage.
Implication on both research are where insinuation is that a good price transmission system is
essential to ascertain that future prices do not diverge from fundamentals. The futures market
has to be proximately cognate to authentic demand and supply conditions in order for futures
prices to be good are speakers for the maxima market. Other than that, to provide a better
understanding of the relationship among each of the variables such as debt, investments
growth, managerial ownership, liquidity and profitability influence to the use of derivatives in the
corporation.