Practical assessments on the use of financial derivatives as risk management tools

This study examines the risk management strategies of non-financial corporations in less efficient financial markets, such as Portugal and Spain. These markets have liquidity constraints and limited availability of derivatives to hedge corporate risk exposures. The study analyzes how these companies dealt with these challenges and how their hedging strategies affected their performance. The results show a complex relationship between the use of derivatives, earnings volatility, and the market value of companies. The study contributes to business practice by helping companies assess the effectiveness of their hedging strategies and may also influence regulators to adapt rules for less liquid markets.