Derivatives Use and Analysts’ Earnings Forecast Accuracy
36 Pages Posted: 29 Jun 2012
Date Written: April 1, 2012
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.
Keywords: Hedging, Derivatives use, Analysts’ forecasts, France
JEL Classification: F31, G32
Suggested Citation: Suggested Citation