TY - JOUR
T1 - Effect of derivative accounting rules on corporate risk-management behavior
AU - Zhang, Haiwen
PY - 2009/6/1
Y1 - 2009/6/1
N2 - I examine the effect of the accounting standard for derivative instruments (SFAS No. 133) on corporate risk-management behavior. I classify a derivative user as an "effective hedger" (EH firm) if its risk exposures decreased after the initiation of the derivatives program, and as an "ineffective hedger/speculator" (IS firm) otherwise. I find that volatility of cash flows and risk exposures related to interest rate, foreign exchange rate, and commodity price decrease significantly for IS firms but not for EH firms, suggesting that IS firms engaged in more prudent risk-management activities after the adoption of SFAS No. 133.
AB - I examine the effect of the accounting standard for derivative instruments (SFAS No. 133) on corporate risk-management behavior. I classify a derivative user as an "effective hedger" (EH firm) if its risk exposures decreased after the initiation of the derivatives program, and as an "ineffective hedger/speculator" (IS firm) otherwise. I find that volatility of cash flows and risk exposures related to interest rate, foreign exchange rate, and commodity price decrease significantly for IS firms but not for EH firms, suggesting that IS firms engaged in more prudent risk-management activities after the adoption of SFAS No. 133.
KW - Derivative financial instruments
KW - Risk-management behavior
KW - SFAS 133
UR - http://www.scopus.com/inward/record.url?scp=67349182852&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=67349182852&partnerID=8YFLogxK
U2 - 10.1016/j.jacceco.2008.11.007
DO - 10.1016/j.jacceco.2008.11.007
M3 - Article
AN - SCOPUS:67349182852
SN - 0165-4101
VL - 47
SP - 244
EP - 264
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 3
ER -