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Use of Derivatives and Analysts’ Forecasts: New Evidence from Non‐financial Brazilian Companies

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  • Rafael Moreira Antônio
  • Fabiano Guasti Lima
  • Rogiene Batista dos Santos
  • Alex Augusto Timm Rathke

Abstract

This study investigates whether market analysts’ forecasts are influenced by the presence of derivative financial instruments in listed firms. From a sample of firms comprising 1173 derivative users and 7797 non‐users for the 2006–14 period, the results indicate the existence of less error behaviour (bias) on earnings per share forecasts for derivative user firms compared to non‐user firms. This finding suggests that these instruments may be used to protect businesses and provide greater stability in the results of companies that use them. The presence of derivative financial instruments is increasing among listed firms, and management can use them for hedging or speculation (thus mitigating or increasing risk). The literature contains few studies on this issue, and the general understanding relies on the assumption that derivative financial instruments provide relevant information for decision making.

Suggested Citation

  • Rafael Moreira Antônio & Fabiano Guasti Lima & Rogiene Batista dos Santos & Alex Augusto Timm Rathke, 2019. "Use of Derivatives and Analysts’ Forecasts: New Evidence from Non‐financial Brazilian Companies," Australian Accounting Review, CPA Australia, vol. 29(1), pages 220-234, March.
    • Handle: RePEc:bla:ausact:v:29:y:2019:i:1:p:220-234
    DOI: 10.1111/auar.12268
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    Cited by:

    1. Zamzamir, Zaminor & Haron, Razali & Baharul Ulum, Zatul Karamah Ahmad & Abdullah Othman, Anwar Hasan, 2021. "Non-linear relationship between foreign currency derivatives and firm value: evidence on Sharī‘ah compliant firms," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 28, pages 156-173.

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