Corporate Risk Management and Hedge Accounting

Argyro Panaretou, Mark B. Shackleton, Paul A. Anthony Taylor
2009 Social Science Research Network  
Motivated by the debate about the economic consequences of mandatory adoption of International Financial Reporting Standards (IFRS), this study investigates the effect of hedge accounting under IFRS on corporate risk management. Using a sample of large UK non-financial firms from 2003 to 2008, we show that the implementation of the new standards reduces the level of asymmetric information faced by derivative users. Specifically, for firms that hedge under IFRS we find that analysts' forecast
more » ... alysts' forecast error and dispersion are significantly lower. The paper contributes to prior research on the effects of hedge accounting and on the adoption of IFRS. participants of the EAA 2009, EFMA 2009 and BAA 2010 conferences for helpful discussions, suggestions and comments. We are responsible for any errors. Acker, D., J. Horton, and I. Tonks. 2002. Accounting standards and analysts' forecast: The impact of IFRS3 on analysts' ability to forecast EPS. Journal of Accounting and Public Policy 21(3): 193-217. Allayannis, G., and E. Ofek. 2001. Exchange rate exposure, hedging and the use of foreign currency derivatives. . 2009. Market reaction to the adoption of IFRS in Europe. Accounting Review 85(1): 31-61. Ashbaugh, H., and M. Pincus. 2001. Domestic accounting standards, international accounting standards, and the predictability of earnings. Journal of Accounting Research 39(3): 417-434. Atiase, R.K. 1985. Predisclosure information, firm capitalization, and security price behavior around earnings announcements.
doi:10.2139/ssrn.1343534 fatcat:fja4vlilx5djxbgf5ws7tyxa3a