Does the use of derivatives increase stock returns? Evidence from banks in GCC countries

Abstract

After the globalization and markets integration, many changes have influenced both financial and banking sectors. Consequently, in order to adapt with these changes the derivative instruments were created and they knew a rapid growth since. The main purpose of the current paper is to investigate empirically how financial derivatives affect financial performance of banks. By using the annual data of 25 commercial banks from GCC countries and daily market data during the period 2006 to 2019, main results reject the usual hypothesis by showing a negative effect of derivatives on performance of banks. The main conclusion rejects the thesis stipulating that derivatives are beneficial for banks.