Risk Management Disclosure Practices of UK Non-Financial Firms after Frs 13
Posted: 17 Jul 2003
In the United Kingdom Financial Reporting Standard (FRS) 13, which came into force for March 1999 year-ends, requires narrative and numerical disclosure of all financial instruments held or issued, in order to provide information about their impact on the firm's risk profile. We use this information to examine the interest rate and currency profile of financial liabilities and assets. We find that UK firms on average have a greater proportion of assets and liabilities tied to floating rates of interest and that they tend to match the interest rate profile of assets and liabilities. Although sterling liabilities on average represent over half of total liabilities, for firms holding sterling and non-sterling debt the US dollar was the dominant currency. We also find a relationship between the level of foreign operations and foreign debt. Since the foreign debt profile is disclosed after the effect of derivatives, this result suggests that cross-currency swaps are used for hedging.
JEL Classification: G32
Suggested Citation: Suggested Citation