The disclosure of information on derivatives under SFAS No. 133

Bhamornsiri, Sak; Schroeder, Richard G.

doi:10.1108/02686900410537784

Cited by 33 publications

(27 citation statements)

References 2 publications

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“…Despite the mandated disclosure of such information, interestingly only 44% of my sample firms disclose this information. This observation is consistent with Bhamornsiri and Schroeder's (2004) findings that compliance with the SFAS 133 is mixed. In Table 7, I test how individual disclosure items 29 Partitioning the sample by 2009 -the year SFAS 161 becoming mandatory for most of my sample firms -leaves the inferences unaffected.…”

Section: Individual Disclosure Itemssupporting

confidence: 82%

Strategic Entry Decisions, Accounting Signals, and Risk Management Disclosure

Zou

2012

SSRN Journal

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This dissertation investigates the economic consequences from hedge accounting signals and risk management disclosure. I first examine the product market consequences to these accounting signals and related disclosure in Chapter 1, then stock market reactions to disclosure requirements in Chapter 2.Chapter 1 examines potential entrants' strategic entry decisions in response to incumbents' accounting information and related disclosure. I predict that potential entrants are more likely to enter markets in which the incumbents' accounting information suggests higher future production costs that are specific to the incumbents themselves. I further hypothesize that the relation is stronger when the accounting signals are accompanied by more disclosure. Using detailed U.S. airline industry data and hedge accounting disclosure under SFAS 133, I find that potential entrants are more likely to enter routes in which the incumbents' lower accumulated other comprehensive income from fuel hedges suggests their higher future production costs. This entry pattern is stronger when incumbents have more transparent annual report disclosure regarding their fuel hedge programs. The entry pattern is also stronger after a systematic increase in risk management disclosure requirements following the (exogenous) adoption of SFAS 161.iii Chapter 2 analyzes stock returns of U.S. airlines around events leading up to the adoption of SFAS 161. SFAS 161 enhanced the disclosure requirements for derivatives and hedging activities. I find that U.S. airlines experienced statistically significant positive returns around the key events leading up to the adoption of SFAS 161. I then examine the cross-sectional variation of the returns around these events. Regression results provide initial support for the real effects theory that greater disclosure requirements could distort firms' hedging and production decisions and lead to suboptimal behavior.In summary, this dissertation provides evidence that competitors use hedge accounting signals and related disclosure in making product market decisions. Meanwhile, additional riskmanagement disclosures may also distort firms' hedging and production behavior, leading to suboptimal decisions. This dissertation sheds light on the ongoing projects by the FASB and the IASB on hedge accounting and disclosure and informs the regulators that costs and benefits should be weighted in hedge accounting policy setting.iv ACKNOWLEDGMENTS

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Section: Individual Disclosure Itemssupporting

confidence: 82%

Strategic Entry Decisions, Accounting Signals, and Risk Management Disclosure

Zou

2012

SSRN Journal

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“…While our primary objective is to contribute to the empirical evidence of notional value information content for banks, the statistically insignificant results for our sample's SFAS No. 133 fair value data are consistent with recent concerns regarding the complexity of this recent standard (e.g., Bhamornsiri and Schroeder, 2004) and, in particular, the reliability of banks' fair value disclosures (e.g., Nissim, 2003). Future research can expand the scope of this study beyond banks, and take advantage of additional SFAS No.…”

Section: Summary and Suggestions For Future Researchsupporting

confidence: 77%

The Value-Relevance of Derivative Disclosures by Commercial Banks: A Comprehensive Study of Information Content Under SFAS Nos. 119 and 133

Wang

Alam

Makar

2005

Rev Quant Finan Acc

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This study examines the value-relevance of banks' derivative disclosures under Statements of Financial Accounting Standards (SFAS) Nos. 119 and 133. Using the complete time-series of SFAS No. 119 disaggregated notional value disclosures and the most recently available SFAS No. 133 fair value data, this study investigates whether such expanded disclosures provide incremental information content beyond earnings and book value. Our results indicate that banks' notional principal amount disclosures are value-relevant, and that this evidence of incremental information content is robust to the inclusion of recently available fair value data and alternative model specifications. Copyright Springer Science + Business Media, Inc. 2005derivatives, banks, information content,

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“…SEC (2001)), which could lead to significant increased transparency of speculation. Recent empirical studies attempt to evaluate disclosures under FAS 133 (Bhamornsiri and Schroeder (2004), Kawaller (2004)). Without knowing the nature of the firm's actual derivatives transactions, however, such studies are constrained to address whether the disclosures would be useful in theory or whether firms appear to be in compliance with the rules.…”

Section: Reporting Of Speculative Activitiesmentioning

confidence: 99%

Taking a View: Corporate Speculation, Governance, and Compensation

Géczy¹,

Minton²,

Schrand³

2007

The Journal of Finance

181

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Using responses to a well-known confidential survey, we study corporations' use of derivatives to "take a view" on interest rate and currency movements. Characteristics of speculators suggest that perceived information and cost advantages lead them to take positions actively; that is, they do not speculate to increase risk by "betting the ranch." Speculating firms encourage managers to speculate through incentive-aligning compensation arrangements and bonding contracts, and they use derivatives-specific internal controls to manage potential abuse. Finally, we examine whether investors reading public corporate disclosures are able to identify firms that indicate speculating in the confidential survey; they are not. Copyright 2007 by The American Finance Association.

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The disclosure of information on derivatives under SFAS No. 133

Cited by 33 publications

References 2 publications

Strategic Entry Decisions, Accounting Signals, and Risk Management Disclosure

Strategic Entry Decisions, Accounting Signals, and Risk Management Disclosure

The Value-Relevance of Derivative Disclosures by Commercial Banks: A Comprehensive Study of Information Content Under SFAS Nos. 119 and 133

Taking a View: Corporate Speculation, Governance, and Compensation

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