How Does Hedge Accounting Influence Firm Value?

Posted: 25 Feb 2018

See all articles by Gerrit Köchling

Gerrit Köchling

TU Dortmund University

Peter N. Posch

TU Dortmund University

Date Written: February 23, 2018

Abstract

We study the relation between hedge accounting and firm value. We propose an easily replicable procedure to generate a dataset directly from company’s annual reports. Using our algorithm we are able to classify, for the first time, firms into cash flow, fair value, or foreign net investment hedge accounting. Our approach allows us to give an overview of hedge accounting use over industries and time. We find significantly positive effects of fair value and foreign net investment hedge accounting on firm value. However cash flow hedge accounting, which makes up the majority of observations, appears to have no substantial influence.

Keywords: Hedge Accounting, Firm Value, Derivatives ,Text Analysis

JEL Classification: G32, M41, D81

Suggested Citation

Köchling, Gerrit and Posch, Peter N., How Does Hedge Accounting Influence Firm Value? (February 23, 2018). Available at SSRN: https://ssrn.com/abstract=3128333 or http://dx.doi.org/10.2139/ssrn.3128333

Gerrit Köchling (Contact Author)

TU Dortmund University ( email )

Friedrich-Wöhler-Weg 6
Dortmund, 44227
Germany

Peter N. Posch

TU Dortmund University ( email )

Otto Hahn Str. 6
Dortmund, 44227
Germany

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