The aim of this study is to determine the importance of derivative financial instruments in determining the financial performance of financial companies operating in Turkey, and the causal relationship with return on equity. For this purpose, quarterly (57 periods) data obtained from the website of the Banking Supervisory Board of the financing companies operating in the 2008Q1-2022Q1 periods were used.
Derivative financial instruments for hedging purposes consist of trading transactions, forward trading transactions, swap trading transactions, trading option transactions and futures trading transactions. As a financial performance indicator; Period Net Profit (Loss)/Average Total Equity (ROE), Derivative Financial Assets / Total Equity (TFO) and Derivative Financial Liabilities / Total Equity (FYO) variables are used as derivative financial instrument variables. Toda-Yamamoto Granger Causality Test was used since it is seen that the variables are stationary at different levels, I(0), I(1) in the unit root tests for the method to be used in determining the causality relationship between the variables.
In the Toda-Yamamoto (1995) Granger causality test, first of all, the appropriate lag length of the VAR model to be applied is determined by using the Wald test. In order to determine whether the established VAR model is valid or not, 4 different diagnostic tests are applied. As a result of the tests performed, ıt has been determined that there is no granger causality from TFO to ROE, no granger causality from FYO to ROE, no granger causality from ROE to TFO, no granger causality from FYO to TFO, no Granger causality from ROE to FYO.
It was observed that there was Granger causality at the 10% significance level from TFO to FYO. This result shows that financing companies cannot use derivative financial instruments efficiently to increase the return on equity.