Corporate Risk Management and Hedge Accounting*

Argyro Panaretou · Mark B. Shackleton · Paul A. Taylor

70 citations0/0 files storedContemporary Accounting Research

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Risk Management in Financial Firms Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting

Abstract

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 error and dispersion are significantly lower. The paper contributes to prior research on the effects of hedge accounting and on the adoption of IFRS.

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1985The Determinants of Firms' Hedging Policies 2004Information and the Cost of Capital 1993Risk Management: Coordinating Corporate Investment and Financing Policies 1996Corporate Disclosure Policy and Analyst Behavior.2000The Economic Consequences of Increased Disclosure 2008Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences 1999The Economic Consequences of Increased Disclosure

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2018The effect of information shocks on dividend payout and dividend value relevance 2009Mandatory Adoption of IFRS and Analysts’ Forecasts: How Much Does Enforcement Matter?2020IFRS compliance, corporate governance and financial reporting quality of GSE-listed non-financial firms 2013The Case for Global Accounting Standards: Arguments and Evidence 2021Meta‐analysis of the Impact of Adoption of IFRS on Financial Reporting Comparability, Market Liquidity, and Cost of Capital

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