Abstract: The increasing propensity of commercial banks to take part in derivative activities is one of the notable developments in the present day financial markets. Latterly, the financial innovation improvements, deregulation and development of the financial markets, and banks” margins decrease, due to low-quality loan applicants, motivate the commercial banks to provide advanced services and products to expand their profits. Profits from traditional banking activities has been decreasing whilst the competitiveness of markets have been increasing thus forcing banks to undertake derivative activities. The objective of this study was to establish the effect of financial derivatives on financial performance of commercial banks in Rwanda. This study adopted a descriptive research design in soliciting information on effects of liquidity management on financial performance of commercial banks. The target population was 14 commercial banks in Rwanda. The study employed the census approach. Primary quantitative data was collected by use of self-administered structured questionnaires. The researcher also used secondary data derived from the audited financial statement of the commercial banks for the period 2014 to 2016. The data collected was analyzed, with respect to the study objectives, using both descriptive and inferential statistics. The data was analyzed using descriptive statistics such as mode, median, mean, standard deviation. Multiple regression analysis was employed to determine relationship between financial derivatives and financial performance of commercial banks in Rwanda. Data was presented in tables, charts, figures and mathematical expressions. Return on Assets (ROA) was used as the proxy for financial performance while financial derivatives, liquidity ratio and shareholders‟ equity ratio were the predictor variables.
Keywords: Financial derivatives use, risk management in derivatives, financial performance.
Title: EFFECT OF FINANCIAL DERIVATIVES USE ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN RWANDA: A CASE OF COMMERCIAL BANKS IN RWANDA
Author: Nyabirande Blaise, Dr. Patrick Mulyungi
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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