The informativeness of derivatives use: Evidence from corporate disclosure through public announcements

Hoelscher, Seth A.; Raman, Vikas

doi:10.1016/j.jbankfin.2019.105731

Cited by 5 publications

(4 citation statements)

References 56 publications

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“…1. Nonetheless, Fernando et al (2019) show that hedging announcements cause economically and statistically significant reactions in equity prices in a sample of gold mining firms.…”

Section: Notesmentioning

confidence: 99%

Voluntary hedging disclosure and corporate governance

Hoelscher

2019

RAF

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Purpose This paper aims to investigate the implications of governance quality on a firm’s information environment in the context of voluntary changes in hedging disclosures made by oil and gas companies. Design/methodology/approach The research utilizes a Factiva-guided search to hand-collect public disclosures related to changes in hedging policies along with the hand collection of financial derivatives positions and operational hedging contracts data using 10-K filings. The paper addresses self-selection bias, which typically plagues voluntary disclosure studies, by implementing a Heckman (1979) two-step model to estimate the decision process, make changes in their hedge program and, conditional on making changes to their hedging activities, provide disclosure. Findings Oil and gas firms with relatively poor governance are more likely to voluntarily disclose hedging changes and do so more frequently (substitution hypothesis). There is evidence that poorly governed firms in the presence of large shareholders (i.e. high institutional ownership) are more likely to provide transparency of hedging policy changes. Originality/value This is the first study to combine hand-collected changes in hedging voluntary disclosures and hand-collected derivative position data to investigate the interaction of corporate governance and voluntary disclosure. The sample allows for analysis between three sub-samples: companies that do not make changes in hedging and do not hedge, firms that make changes in their hedging policies but do not disclose the changes during a given year and companies that change their hedging activities and provide voluntary disclosure. This unique setting helps to alleviate concerns of self-selection bias associated with voluntary disclosure.

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“…1. Nonetheless, Fernando et al (2019) show that hedging announcements cause economically and statistically significant reactions in equity prices in a sample of gold mining firms.…”

Section: Notesmentioning

confidence: 99%

Voluntary hedging disclosure and corporate governance

Hoelscher

2019

RAF

Self Cite

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“…Many companies hedge their financial risk and speculate in commodities and capital markets using derivatives (Chang et al, 2016). However, despite significant literature, there is no consensus on the effect of derivative usage on firm value (Fernando et al, 2020). Borderless economies have transformed the entire world into a more integrated one, increasing corporate risk and return exposure (Butt et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

“…, 2016). However, despite significant literature, there is no consensus on the effect of derivative usage on firm value (Fernando et al. , 2020).…”

Section: Introductionmentioning

confidence: 99%

Corporate derivatives use and firm value: conditional role of corporate governance

Butt

Rizavi

Nazir

et al. 2022

SAJBS

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PurposeThis study aims to examine the effect of corporate derivatives use on firm value and how the corporate governance index modifies this relationship.Design/methodology/approachThe sample consists of 219 nonfinancial firms on the Pakistan Stock Exchange (PSX) from 2011 to 2019. The study used ordinary least square regression with year and industry dummies for estimations. Multiple estimation models such as fixed/random effect, Fama–MacBeth and two-stage least squares (2SLS) are used for robustness. Finally, the PROCESS macro tool is used to estimate the effect of moderating the role of corporate governance (CG) as robustness.FindingsThe findings show that derivatives use has an inverse influence on firm value. The firms did not use derivatives as a risk management tool but for speculation motives. However, the corporate governance index significantly weakens this relationship. However, strong governance forces the managers to use derivatives for hedging purposes. The firm-specific factors, including size, age, leverage, cash, financial distress cost, dividend and growth opportunities, also significantly influence firm value. The findings are robust to the other estimation models.Research limitations/implicationsThe findings indicate that emerging economies like Pakistan are more prone to agency problems. The strong corporate governance structure helps firms turn the speculative motive of derivatives use into hedging purposes and mitigate the agency issues.Practical implicationsThis empirical evidence suggests that good governance structures can help improve the impact of derivative usage on firm value.Originality/valueTo the best of the author's knowledge, this is the first study that examines the conditional role of corporate governance on the derivatives–value relationship from the viewpoint of agency problem/speculative motive.

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“…Corporate derivatives disclosure can cause equity prices to change the stock market (Bourveau et al, 2018). Fernando et al (2020) provided empirical evidence on public reactions to the derivatives positions of the gold-mining companies in a survey of 112 firms in this industry. Public notice of an increase in a derivatives position led to a decrease in equity…”

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confidence: 99%

Barriers to Derivative Accounting Disclosure: The Case of Vietnamese Firms

Nguyen¹,

TRAN²,

Nguyen³

2020

JAFEB

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This paper explores the barriers to derivative accounting disclosures in Vietnamese companies and ranks their relative importance for effective and efficient remedies. The Delphi technique was applied to get agreement of panel of experts on the measurement of factors hindering disclosure. Unstructured questionnaires were first sent to twelve experts who had both practical experience and academic knowledge in the field to get ideas on the obstructions to derivatives disclosure. The structured questionnaire was designed to get their agreement on barriers to derivative accounting disclosures. The data analysis with mean, median, mode, standard deviation, and quartile has been implemented to ensure the unanimity. Market-related factors, legislation, accountants' attributes, managers' attributes, information technology and communication, and on-site training were the six major obstacles agreed upon by the experts during their in-depth interviews. Then, these factors were ranked by applying the analytical hierarchy process (AHP). The findings confirmed the priority of information technology and communication, which held the greatest weight. Legislation ranked second, followed by market-related factors and on-site training, which explained the impediments to derivatives disclosure. Managers' and accountants' attributes had the least contribution to the barriers to derivative disclosures. The results have important implications for actions to enhance corporate derivative disclosures in Vietnam.

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The informativeness of derivatives use: Evidence from corporate disclosure through public announcements

Cited by 5 publications

References 56 publications

Voluntary hedging disclosure and corporate governance

Voluntary hedging disclosure and corporate governance

Corporate derivatives use and firm value: conditional role of corporate governance

Barriers to Derivative Accounting Disclosure: The Case of Vietnamese Firms

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