Macro factors affecting the decisions to use currency derivatives of Vietnam's import and export enterprises: A new approach from LASSO regression models

Abstract

The emergence of currency derivatives plays a particularly important role for import - export businesses in minimizing financial risks and ensuring profits from future purchase and sale contracts. Although currency transactions using this tool bring many benefits, it is also inevitable that some risks occur due to uncontrollable fluctuations in exchange rates, interest rates, inflation and foreign exchange reserves in international trading transactions for entrepreneurs. Therefore, the study is conducted with the objective of analyzing the macro factors affecting the decision to use currency derivatives of import-export enterprises in Vietnam. The study uses secondary data collected in the period 2015 - 2021 of 100 enterprises with import-export activities in Vietnam listed on stock exchanges. Applying the new regression model LASSO to analyze the rules, affecting the decision to use financial derivatives and compare with the results when using the S-GMM method. The main results show that all four main independent variables have a significant impact on the decision to use currency derivatives of Vietnamese import and export enterprises. These are all based on science as well as previous research. Specifically, among the four main independent variables, interest rates, inflation and exchange rates have a positive and significant impact on the decision to use currency derivatives of Vietnamese import and export enterprises; meanwhile, foreign exchange reserves have a negative impact on the decision to use currency derivatives of Vietnamese import and export enterprises. In conclusion, the research will make a major contribution to the correction of defects in the model through the LASSO regression model. After obtaining the research results, the study will provide management implications for businesses to make decisions about using the tool effectively with the least risk.