Navigating Adoption of Financial Derivatives: Dynamics of Complexity and Regulatory System

Tunze, Ruva and Richard, Evelyn M. and Mkwizu, Eric (2025) Navigating Adoption of Financial Derivatives: Dynamics of Complexity and Regulatory System. THEORY METHODOLOGY PRACTICE: CLUB OF ECONOMICS IN MISKOLC, 21 (2). pp. 62-76. ISSN 1589-3413

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Abstract

This study examines the intention of financial institutions to adopt financial derivatives in less developed markets. Integrating key innovation attributes, complexity and regulatory system as a moderator. The theoretical framework uses complexity theory and financial innovation theory to provide a robust explanation of adoption behaviour. Data were collected from 142 financial institutions in Tanzania. Using Structural Equation Modelling (SEM).The results demonstrate that complexity and the responsive regulatory system significantly influence the intention to adopt financial derivatives, and the regulatory system significantly moderated the adverse effect of complexity. Theoretically, this study contributes to the financial innovation literature by integrating complexity theory in adoption models, offering empirical validation in a developing market context. These findings provide practical insights for derivative designers, financial educators, and regulatory authorities.

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