Effects of the Adoption of Hedge Accounting

38 Pages Posted: 2 Dec 2015

See all articles by Florian Kiy

Florian Kiy

Goethe University Frankfurt

Date Written: December 1, 2015

Abstract

This study examines the effects of the adoption of hedge accounting for non-financial companies. In my analysis I use two market value proxies and employ a propensity-score matching model in attempt to control for different characteristics between non-adopters and adopters of hedge accounting. I observe a significant negative association for the adoption of hedge accounting and market value. This finding suggests that companies who have adopted hedge accounting may deviate from their optimal hedging strategy to meet all requirements and restrictions implemented in SFAS 133 in order to apply hedge accounting and thus decrease firm value. The observed association between hedge accounting and market value is lower for larger non-financial companies, while I do not observe varying effects of the adoption of hedge accounting for companies with different levels of risk exposure.

Keywords: Hedge accounting, capital markets, accounting for derivatives, propensity-score matching, risk-management

JEL Classification: M4

Suggested Citation

Kiy, Florian, Effects of the Adoption of Hedge Accounting (December 1, 2015). Available at SSRN: https://ssrn.com/abstract=2697570 or http://dx.doi.org/10.2139/ssrn.2697570

Florian Kiy (Contact Author)

Goethe University Frankfurt

Theodor-W.Adorno-Platz 4
Frankfurt am Main, 60629
Germany

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