The Information Asymmetry Effects of Expanded Disclosures About Derivative and Hedging Activities

Published Online:https://doi.org/10.1287/mnsc.2021.4198

References

  • Ahmed AS, Kilic E, Lobo GJ (2006) Does recognition vs. disclosure matter? Evidence from value-relevance of banks’ recognized and disclosed derivative financial instruments. Accounting Rev. 81(3):567–588.CrossrefGoogle Scholar
  • Ahmed AS, Kilic E, Lobo GJ (2011) Effects of SFAS 133 on the risk relevance of accounting measures of banks’ derivative exposures. Accounting Rev. 86(3):769–804.CrossrefGoogle Scholar
  • Akbas F, Meschke F, Wintoki MB (2016) Director networks and informed traders. J. Accounting Econom. 62(1):1–23.CrossrefGoogle Scholar
  • Allayannis G, Weston JP (2001) The use of foreign currency derivatives and firm market value. Rev. Financial Stud. 14(1):243–276.CrossrefGoogle Scholar
  • Allee KD, DeAngelis MD (2015) The structure of voluntary disclosure narratives: Evidence from tone dispersion. J. Accounting Res. 53(2):241–274.CrossrefGoogle Scholar
  • Armstrong CS, Kepler JD (2018) Theory, research design assumptions, and causal inferences. J. Accounting Econom. 66(2–3):366–373.CrossrefGoogle Scholar
  • Bagehot W (1971) The only game in town. Financial Anal. J. 27(2):12–14.CrossrefGoogle Scholar
  • Bank for International Settlements (BIS) (2018) BIS statistical bulletin, September 2018. Report, Bank for International Settlements, Basel, Switzerland.Google Scholar
  • Bao Y, Datta A (2014) Simultaneously discovering and quantifying risk types from textual risk disclosures. Management Sci. 60(6):1371–1391.LinkGoogle Scholar
  • Beatty RP, Hand JRM (1992) The causes and effects of mandated accounting standards: SFAS No. 94 as a test of the level playing field theory. J. Accounting Auditing Finance 7(4):509–530.CrossrefGoogle Scholar
  • Bens D, Cheng M, Neamtiu M (2016) The impact of SEC disclosure monitoring on the uncertainty of fair value estimates. Accounting Rev. 91(2):349–375.CrossrefGoogle Scholar
  • Berrospide JM, Meisenzahl RR (2015) The real effects of credit line drawdowns. Finance and Economic Discussion Series Paper 2015-007, U.S. Board of Governors of the Federal Reserve System, Washington, DC. https://www.federalreserve.gov/econresdata/feds/2015/files/2015007pap.pdfGoogle Scholar
  • Bloomfield R, Hodge FD, Hopkins PE, Rennekamp K (2015) Does coordinated presentation help credit analysts identify firm characteristics? Contemporary Accounting Res. 32(2):507–527.CrossrefGoogle Scholar
  • Caban D (2018) The relevance/reliability impact the financial crisis and SFAS 161 had on the use and reporting of derivatives within the banking industry. Acad. Accounting Financial Stud. J. 22(1):1–23.Google Scholar
  • Calluzzo P, Dudley D (2018) Corporate hedging during the financial crisis. Working paper, Queen’s University, Kingston, ON, Canada.Google Scholar
  • Campbell JL, Khan U, Pierce S (2021) The effect of mandatory disclosure on market inefficiencies: Evidence from FASB Statement No. 161. Accounting Rev. 96(2):153–176.CrossrefGoogle Scholar
  • Campbell JL, Chen H, Dhaliwal DS, Lu H-m, Steele LB (2014) The information content of mandatory risk factor disclosures in corporate filings. Rev. Accounting Stud. 19(1):396–455.CrossrefGoogle Scholar
  • Chang HS, Donohoe M, Sougiannis T (2016) Do analysts understand the economic and reporting complexities of derivatives? J. Accounting Econom. 61(2):584–604.CrossrefGoogle Scholar
  • Chen J, Dou Y, Zou Y (2021) Information externalities of SFAS 161: Evidence from supply chains. Accounting Rev. 96(4):179–202.CrossrefGoogle Scholar
  • Cherian JA, Jarrow RA (1998) Options markets, self-fulfilling prophecies, and implied volatilities. Rev. Derivatives Res. 2(1):5–37.CrossrefGoogle Scholar
  • Chiorean R (2016) Real and accounting effects of mandatory derivatives disclosures. Working paper, Lehigh University, Bethlehem, PA.Google Scholar
  • Copeland TE, Galai D (1983) Information effects on the bid-ask spread. J. Finance 38(5):1457–1469.CrossrefGoogle Scholar
  • Cowins E (2014) Does hedge accounting reflect firms’ risk management activities? Working paper, Washington and Lee University, Lexington, VA.Google Scholar
  • DeMarzo PM, Duffie D (1991) Corporate financial hedging with proprietary information. J. Econom. Theory 53(2):261–286.CrossrefGoogle Scholar
  • DeMarzo PM, Duffie D (1995) Corporate incentives for hedging and hedge accounting. Rev. Financial Stud. 8(3):743–771.CrossrefGoogle Scholar
  • Diamond DW (1985) Optimal release of information by firms. J. Finance 40(4):1071–1094.CrossrefGoogle Scholar
  • Filzen J (2015) The information content of risk factor disclosures in quarterly reports. Accounting Horizons 29(4):887–916.CrossrefGoogle Scholar
  • Financial Accounting Standards Board (FASB) (2008) Disclosures about derivative instruments and hedging activities—An amendment of FASB Statement No. 133. Summary of Statement 161, FASB, Norwalk, CT.Google Scholar
  • Financial Accounting Standards Board (FASB) (2012) Disclosure framework. Discussion Paper, FASB, Norwalk, CT.Google Scholar
  • Financial Accounting Standards Board (FASB) (2014) Proposed statement of financial accounting concepts—Conceptual framework for financial reporting: Chapter 8: Notes to financial statements. Exposure Draft, FASB, Norwalk, CT.Google Scholar
  • Financial Accounting Standards Board (FASB) (2017) Derivatives and hedging (topic 815): Targeted improvements to accounting for hedging activities. Accounting Standards Update No. 2017-12, FASB, Norwalk, CT.Google Scholar
  • Géczy C, Minton BA, Schrand C (1997) Why firms use currency derivatives. J. Finance 52(4):1323–1354.CrossrefGoogle Scholar
  • Glosten LR, Milgrom PR (1985) Bid, ask and transaction prices in a specialist market with heterogeneously informed traders. J. Financial Econom. 14(1):71–100.CrossrefGoogle Scholar
  • Guay WR (1999) The impact of derivatives on firm risk: An empirical examination of new derivative users. J. Accounting Econom. 26(1-3):319–351.CrossrefGoogle Scholar
  • Heinle MS, Smith KC (2017) A theory of risk disclosure. Rev. Accounting Stud. 22(4):1459–1491.CrossrefGoogle Scholar
  • Heinle MS, Smith KC, Verrecchia RE (2018) Risk-factor disclosure and asset prices. Accounting Rev. 93(2):191–208.CrossrefGoogle Scholar
  • Hirst DE, Hopkins PE (1998) Comprehensive income reporting and analysts’ valuation judgments. J. Accounting Res. 36(Supplement):47–75.CrossrefGoogle Scholar
  • Holthausen DM (1979) Hedging and the competitive firm under price uncertainty. Amer. Econom. Rev. 69(5):989–995.Google Scholar
  • Hope O-K, Hu D, Lu H (2016) The benefits of specific risk-factor disclosures. Rev. Accounting Stud. 21(4):1005–1045.CrossrefGoogle Scholar
  • Hull JC (2012) Options, Futures, and Other Derivatives (Prentice Hall, Boston).Google Scholar
  • International Accounting Standards Board (IASB) (2013) A review of the conceptual framework for financial reporting. Discussion Paper DP/2013/1, IFRS Foundation, London.Google Scholar
  • Johnson TL, So EC (2012) The option to stock volume ratio and future returns. J. Financial Econom. 106(2):262–286.CrossrefGoogle Scholar
  • Kelly JD (2007) Comment letter submitted to the Financial Accounting Standards Board on behalf of National City Corporation. Accessed December 7, 2021, https://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175818454029&blobheader=application%2Fpdf&blobheadername2=Content-Length&blobheadername1=Content-Disposition&blobheadervalue2=295959&blobheadervalue1=filename%3D51214.pdf&blobcol=urldata&blobtable=MungoBlobs.Google Scholar
  • Kim O, Verrecchia RE (1994) Market liquidity and volume around earnings announcements. J. Accounting Econom. 17(1–2):41–67.CrossrefGoogle Scholar
  • Koonce L, Lipe MG, McAnally ML (2005) Judging the risk of financial instruments: Problems and potential remedies. Accounting Rev. 80(3):871–895.CrossrefGoogle Scholar
  • Koonce L, Lipe MG, McAnally ML (2008) Investor reactions to derivative use and outcomes. Rev. Accounting Stud. 13(4):571–597.CrossrefGoogle Scholar
  • Kravet T, Muslu V (2013) Textual risk disclosures and investors’ risk perceptions. Rev. Accounting Stud. 18(4):1088–1122.CrossrefGoogle Scholar
  • Lev B (1988) Toward a theory of equitable and efficient accounting policy. Accounting Rev. 63(1):1–22.Google Scholar
  • Linsmeier TJ, Thornton DB, Venkatachalam M, Welker M (2002) The effect of mandated market risk disclosures on trading volume sensitivity to interest rate, exchange rate, and commodity price movements. Accounting Rev. 77(2):343–377.CrossrefGoogle Scholar
  • Maines LA, McDaniel LS (2000) Effects of comprehensive-income characteristics on nonprofessional investors’ judgments: The role of financial-statement presentation format. Accounting Rev. 75(2):179–207.CrossrefGoogle Scholar
  • Manchiraju H, Pierce S, Sridharan S (2018) Is hedge accounting designation informative about how firms use derivatives? Working paper, Indian School of Business, Hyderabad.Google Scholar
  • McAnally ML (1996) Banks, risk, and FAS105 disclosures. J. Accounting Auditing Finance 11(3):453–490.CrossrefGoogle Scholar
  • Nandi S (2000) Asymmetric information about volatility: How does it affect implied volatility, option prices and market liquidity? Rev. Derivatives Res. 3(3):215–236.CrossrefGoogle Scholar
  • Pan J, Poteshman AM (2006) The information in option volume for future stock prices. Rev. Financial Stud. 19(3):871–908.CrossrefGoogle Scholar
  • Panaretou A, Shackleton MB, Taylor PA (2013) Corporate risk management and hedge accounting. Contemporary Accounting Res. 30(1):116–139.CrossrefGoogle Scholar
  • Pérez-González F, Yun H (2013) Risk management and firm value: Evidence from weather derivatives. J. Finance 68(5):2143–2176.CrossrefGoogle Scholar
  • Pierce S (2020) Determinants and consequences of firms’ derivative accounting decisions. J. Financial Reporting 5(1):81–114.CrossrefGoogle Scholar
  • Rennekamp K (2012) Processing fluency and investors’ reactions to disclosure readability. J. Accounting Res. 50(5):1319–1354.CrossrefGoogle Scholar
  • Roulstone D (1999) Effect of SEC Financial Reporting Release No. 48 on derivative and market risk disclosures. Accounting Horizons 13(4):343–363.CrossrefGoogle Scholar
  • Savický P, Hlavácová J (2002) Measures of word commonness. J. Quant. Linguistics 9(3):215–231.CrossrefGoogle Scholar
  • Schrand CM (1997) The association between stock-price interest rate sensitivity and disclosures about derivative instruments. Accounting Rev. 72(1):87–109.Google Scholar
  • Schwert GW (1981) Using financial data to measure effects of regulation. J. Law Econom. 24(1):121–158.CrossrefGoogle Scholar
  • Securities and Exchange Commission (SEC) (2020) SEC proposes amendments to modernize and enhance financial disclosures. Press release, Securities and Exchange Commission, Washington, DC. https://www.sec.gov/news/press-release/2020-25.Google Scholar
  • Shroff N, Sun AX, White HD, Zhang W (2013) Voluntary disclosure and information asymmetry: Evidence from the 2005 securities offering reform. J. Accounting Res. 51(5):1299–1345.CrossrefGoogle Scholar
  • Smith K (2019) Financial markets with trade on risk and return. Rev. Financial Stud. 32(10):4042–4078.CrossrefGoogle Scholar
  • Stulz RM (1984) Optimal hedging policies. J. Financial Quant. Anal. 19(2):127–140.CrossrefGoogle Scholar
  • Tufano P (1996) Who manages risk? An empirical examination of risk management practices in the gold mining industry. J. Finance 51(4):1097–1137.CrossrefGoogle Scholar
  • Venkatachalam M (1996) Value-relevance of banks’ derivatives disclosures. J. Accounting Econom. 22(1–3):327–355.CrossrefGoogle Scholar
  • Wong MHF (2000) The association between SFAS no. 119 derivatives disclosures and the foreign exchange risk exposure of manufacturing firms. J. Accounting Res. 38(2):387–417.CrossrefGoogle Scholar
  • Wooldridge JM (2010) Econometric Analysis of Cross Section and Panel Data (MIT Press, Cambridge, MA).Google Scholar
  • Zhang H (2009) Effect of derivative accounting rules on corporate risk-management behavior. J. Accounting Econom. 47(3):244–264.CrossrefGoogle Scholar
  • Zou Y (2019) Strategic entry decisions, accounting signals, and risk management. Working paper, University of Connecticut, Storrs.Google Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.