Derivatives Use and Analysts’ Earnings Forecast Accuracy
Lunam University - Ecole Superieure Des Sciences Commerciales D'Angers (ESSCA)
Champagne School of Management (Groupe Esc Troyes); Institut de Recherche en Gestion (Université Paris Est Créteil)
University of Lille I - Institute of Business Administration
April 1, 2012
Frontiers in Finance and Economics, Vol. 9, No. 1, 51-86
This paper examines whether the use of derivatives improves firms’ information environment, which is a relatively under-investigated research area in risk management literature. Using a sample of French non-financial listed firms, we show that firms which use derivatives enjoy high levels of forecast accuracy relative to firms that do not. This result is in accord with the arguments developed by DeMarzo and Duffie (1995) and Breeden and Vishwanathan (1998) suggesting that hedging is an important means of reducing information asymmetry.
Number of Pages in PDF File: 36
Keywords: Hedging, Derivatives use, Analysts’ forecasts, France
JEL Classification: F31, G32Accepted Paper Series
Date posted: June 29, 2012
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