Do enhanced derivative disclosures work? An informational perspective

He, G.; Ren, H.M.; Taffler, R.

Abstract

Firms use derivatives both for hedging and nonhedging purposes. The Statement of Financial Accounting Standards No. 161 (SFAS 161) requires firms to disclose the purposes of their derivatives usage, thereby helping investors to evaluate the effects of derivatives usage on firm performance. Using a hand-collected sample of US listed firms and a difference-in-differences research design, we find that, compared with nonderivative-users, derivative-users compliant with SFAS 161 experience a significantly greater reduction in stock illiquidity and the probability of informed trading in the post-SFAS 161 period, and such impact is evident only for firms with a high degree of investor attention.

Citation

He, G., Ren, H., & Taffler, R. (2022). Do enhanced derivative disclosures work? An informational perspective. Journal of Futures Markets, 42(1), 24-60. https://doi.org/10.1002/fut.22275

• Journal Article Type: Article
• Acceptance Date: Sep 12, 2021
• Online Publication Date: Sep 28, 2021
• Publication Date: 2022-01
• Deposit Date: Sep 12, 2021
• Publicly Available Date: Sep 29, 2023
• Journal: Journal of Futures Markets
• Print ISSN: 0270-7314
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 42
• Issue: 1
• Pages: 24-60
• DOI: https://doi.org/10.1002/fut.22275
• Public URL: https://durham-repository.worktribe.com/output/1250901