Effect of Financial Derivatives Usage on the Earnings Informativeness

• Main Authors: Kuang-Yi Fang, 方光儀
• Other Authors: Ching-Lung Chen
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/33096452836518974624

碩士 === 國立雲林科技大學 === 會計系 === 103 === Derivatives, with the feature of low trading costs and high rewards, have become one of the popular financial instruments for managerial risk-aversion (hedge) and/or investing decisions. Note that the derivatives usage can be devided into “hedging” versus “non-hedging” motives, this suduy examines whether these two differential motivations of derivatives usage results distinct effects on the earnings informativeness (future earnings response coefficient, FERC). This study conjectures the hedge-purpose (non-hedge-purpose) derivatives usage will reduce (aggravate) the risks brings by the flunctuation of interest rate, currency or prices of material/product, which in turn, enhance (mitigate) the earnings informativeness. The empirical result reveals, as conjectured, the earnings informativeness is enhanced for firms with hedge-purpose derivatives usage. Yet, the expected negative effect of non-hedge-purpose derivatives usage on the earnings informativeness does not gain empirical supported in the analysis. This study implements several diagnostic checks and documents the empirical results are robust to various specifications.