Value-relevance of banks' derivatives disclosures

Value-relevance of banks' derivatives disclosures This paper investigates the value-relevance of banks' derivatives disclosures provided under SFAS 119. The findings suggest that the fair value estimates for derivatives help explain cross-sectional variation in bank share prices and that the fair values have incremental explanatory power over and above notional amounts of derivatives. I also conduct cross-sectional tests to provide preliminary evidence on the usefulness of derivatives disclosures in examining banks' risk-management strategies. While I find that banks, on average, are reducing their risk exposures using derivatives, further analysis reveals that only 47% of the sample banks appear to use derivatives to reduce risk. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Value-relevance of banks' derivatives disclosures

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Publisher
Elsevier
Copyright
Copyright © 1996 Elsevier Ltd
ISSN
0165-4101
DOI
10.1016/S0165-4101(96)00433-8
Publisher site
See Article on Publisher Site

Abstract

This paper investigates the value-relevance of banks' derivatives disclosures provided under SFAS 119. The findings suggest that the fair value estimates for derivatives help explain cross-sectional variation in bank share prices and that the fair values have incremental explanatory power over and above notional amounts of derivatives. I also conduct cross-sectional tests to provide preliminary evidence on the usefulness of derivatives disclosures in examining banks' risk-management strategies. While I find that banks, on average, are reducing their risk exposures using derivatives, further analysis reveals that only 47% of the sample banks appear to use derivatives to reduce risk.

Journal

Journal of Accounting and EconomicsElsevier

Published: Aug 1, 1996

References

  • Fair value disclosures of bank holding companies
    Eccher, A.; Ramesh, K.; Thiagarajan, S.R.

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