When the Tail Wags the Dog: Hedge Accounting and its Influence on Financial Hedging
Accounting and Business Research, Forthcoming
53 Pages Posted: 11 Apr 2011 Last revised: 12 Apr 2011
Date Written: March 20, 2011
Abstract
We analyse the application of hedge accounting and its influence on hedging behaviour in German and Swiss non-financial corporations. Of our sample companies, 72% apply hedge accounting. The likelihood of its use is associated with frequency of derivatives usage, size, IFRS experience, perceived importance of reduced earnings volatility and low growth opportunities. More than half of the companies using hedge accounting indicate that the accounting rules influence their hedging behaviour. Companies are more likely to be affected if they use derivatives only occasionally, are smaller, are highly leveraged, have dispersed shareholding, have fewer growth opportunities and hedge selectively.
Keywords: hedge accounting, hedging, IAS 39, derivatives, risk management, SFAS 133
JEL Classification: G30, M41
Suggested Citation: Suggested Citation
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