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Do enhanced derivative disclosures work? An informational perspective

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He, Guanming, Ren, Helen Mengbing and Taffler, Richard J. (2022) Do enhanced derivative disclosures work? An informational perspective. Journal of Future Markets, 42 (1). pp. 24-60. doi:10.1002/fut.22275

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Official URL: https://doi.org/10.1002/fut.22275

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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.

Item Type: Journal Article
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Warwick Business School > Accounting
Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH): Derivative securities, Information asymmetry, Liquidity (Economics), Financial risk management
Journal or Publication Title: Journal of Future Markets
Publisher: Wiley
ISSN: 0270-7314
Official Date: January 2022
Dates:
DateEvent
January 2022Published
28 September 2021Available
12 September 2021Accepted
Volume: 42
Number: 1
Page Range: pp. 24-60
DOI: 10.1002/fut.22275
Status: Peer Reviewed
Publication Status: Published
Reuse Statement (publisher, data, author rights): This is the peer reviewed version of the following article: He, G., Ren, H. M., & Taffler, R. (2021). Do enhanced derivative disclosures work? An informational perspective. Journal of Futures Markets, 1– 37. which has been published in final form at https://doi.org/10.1002/fut.22275. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
Access rights to Published version: Restricted or Subscription Access
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