IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/90213.html
   My bibliography  Save this paper

Companies’ Characteristics and the Choice of Hedge Accounting for Derivatives Reporting: Evidence from Malaysian Listed Companies

Author

Listed:
  • Abdullah, Azrul
  • Ku Ismail, Ku Nor Izah

Abstract

This paper investigates the adoption of hedge accounting by Malaysian listed companies in reporting their use of derivatives for hedging activities. Based on a sample of 300 Malaysian listed companies, we found that only 162 companies (54 percent) used derivatives to hedge their financial risks exposure and only 30 percent of the companies chose to apply hedge accounting. In addition, this study examines the relationship between the company specific characteristics and their application of hedge accounting. The logistic regression results showed that the decision to apply hedge accounting by Malaysian companies is positively influenced by the company size and leverage. The implications of the findings were discussed.

Suggested Citation

  • Abdullah, Azrul & Ku Ismail, Ku Nor Izah, 2017. "Companies’ Characteristics and the Choice of Hedge Accounting for Derivatives Reporting: Evidence from Malaysian Listed Companies," MPRA Paper 90213, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:90213
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/90213/1/MPRA_paper_90213.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Astami, Emita W. & Tower, Greg, 2006. "Accounting-policy choice and firm characteristics in the Asia Pacific region: An international empirical test of Costly Contracting Theory," The International Journal of Accounting, Elsevier, vol. 41(1), pages 1-21.
    2. Watts, Ross L & Zimmerman, Jerold L, 1983. "Agency Problems, Auditing, and the Theory of the Firm: Some Evidence," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 613-633, October.
    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    4. Matthew Bamber & Kevin McMeeking, 2010. "An examination of voluntary financial instruments disclosures in excess of mandatory requirements by UK FTSE 100 non‐financial firms," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 11(2), pages 133-153, September.
    5. Cairns, David & Massoudi, Dianne & Taplin, Ross & Tarca, Ann, 2011. "IFRS fair value measurement and accounting policy choice in the United Kingdom and Australia," The British Accounting Review, Elsevier, vol. 43(1), pages 1-21.
    6. Lopes, Patricia Teixeira & Rodrigues, Lucia Lima, 2007. "Accounting for financial instruments: An analysis of the determinants of disclosure in the Portuguese stock exchange," The International Journal of Accounting, Elsevier, vol. 42(1), pages 25-56.
    7. Azrul Bin Abdullah & Ku Nor Izah Ku Ismail, 2008. "Disclosure of Voluntary Accounting Ratios by Malaysian Listed Companies," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 6(1), pages 1-20, January.
    8. René M. Stulz, 2004. "Should We Fear Derivatives?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 173-192, Summer.
    9. Abdullah, Azrul & Ku Ismail, Ku Nor Izah & Mat Isa, Norshamshina, 2015. "Risk Management Committee and Disclosure of Hedging Activities Information among Malaysian Listed Companies," MPRA Paper 77962, University Library of Munich, Germany.
    10. Beretta, Sergio & Bozzolan, Saverio, 2004. "A framework for the analysis of firm risk communication," The International Journal of Accounting, Elsevier, vol. 39(3), pages 265-288.
    11. Jonas Oliveira & Lúcia Lima Rodrigues & Russell Craig, 2011. "Risk-related disclosures by non-finance companies: Portuguese practices and disclosure characteristics," Managerial Auditing Journal, Emerald Group Publishing, vol. 26(9), pages 817-839, October.
    12. Chalmers, Keryn & Godfrey, Jayne M., 2004. "Reputation costs: the impetus for voluntary derivative financial instrument reporting," Accounting, Organizations and Society, Elsevier, vol. 29(2), pages 95-125, February.
    13. Juana Aledo & Fernando García-Martínez & Juan M. Marín Diazaraque, 2009. "Firm-specific factors influencing the selection of accounting options provided by the IFRS: Empirical evidence from Spanish market," Working Papers 0926, Banco de España.
    14. Rick Cuijpers & Willem Buijink, 2005. "Voluntary adoption of non-local GAAP in the European Union: A study of determinants and consequences," European Accounting Review, Taylor & Francis Journals, vol. 14(3), pages 487-524.
    15. Jacqueline Birt & Michaela Rankin & Chen L. Song, 2013. "Derivatives use and financial instrument disclosure in the extractives industry," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 55-83, March.
    16. Heaney, Richard & Winata, Henry, 2005. "Use of derivatives by Australian companies," Pacific-Basin Finance Journal, Elsevier, vol. 13(4), pages 411-430, September.
    17. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    18. Grantley Taylor & Greg Tower & Mitchell Van Der Zahn & John Neilson, 2008. "Corporate governance determinants on Australian resource companies' financial instrument disclosure practices," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 16(1), pages 56-73, May.
    19. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
    20. Abdullah, Azrul & Ku Ismail, Ku Nor Izah, 2016. "The Effectiveness of Risk Management Committee and Hedge Accounting Practices in Malaysia," MPRA Paper 77960, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abdullah, Azrul Bin, 2018. "Company-specific characteristics and the choice of hedge accounting for derivatives reporting: Malaysian case," SocArXiv npa6v, Center for Open Science.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abdullah, Azrul Bin, 2018. "Company-specific characteristics and the choice of hedge accounting for derivatives reporting: Malaysian case," SocArXiv npa6v, Center for Open Science.
    2. Abdullah, Azrul & Ku Ismail, Ku Nor Izah, 2015. "Hedging Activities Information and Risk Management Committee Effectiveness: Malaysian evidence," MPRA Paper 85026, University Library of Munich, Germany.
    3. Abdullah, Azrul Bin & Ismail, Ku Nor Izah Ku, 2018. "Hedging Activities Information and Risk Management Committee Effectiveness: Malaysian evidence," SocArXiv kxfqe, Center for Open Science.
    4. Abdullah, Azrul Bin & Ismail, Ku Nor Izah Ku & Isa, Norshamshina Mat, 2018. "Risk Management Committee and Disclosure of Hedging Activities Information among Malaysian Listed Companies," SocArXiv qfw5j, Center for Open Science.
    5. Azrul Abdullah & Ku Nor Izah Ku Ismail & Norshamshina Mat Isa, 2015. "Risikomanagement-Ausschuss und Offenlegung von Hedging-Aktivitäten Informationen unter Malaysian gelisteten Unternehmen [Risk Management Committee and Disclosure of Hedging Activities Information A," Post-Print halshs-01509153, HAL.
    6. Abdullah, Azrul & Ku Ismail, Ku Nor Izah & Mat Isa, Norshamshina, 2015. "Risk Management Committee and Disclosure of Hedging Activities Information among Malaysian Listed Companies," MPRA Paper 77962, University Library of Munich, Germany.
    7. Jacqueline Birt & Michaela Rankin & Chen L. Song, 2013. "Derivatives use and financial instrument disclosure in the extractives industry," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 55-83, March.
    8. Rihab Grassa & Nejia Moumen & Khaled Hussainey, 2021. "What drives risk disclosure in Islamic and conventional banks? An international comparison," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6338-6361, October.
    9. Ridhima Saggar & Balwinder Singh, 2019. "Drivers of Corporate Risk Disclosure in Indian Non-financial Companies: A Longitudinal Approach," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 44(3), pages 303-325, August.
    10. Malaquias, Rodrigo Fernandes & Zambra, Pablo, 2018. "Disclosure of financial instruments: Practices and challenges of Latin American firms from the mining industry," Research in International Business and Finance, Elsevier, vol. 45(C), pages 158-167.
    11. Rute Gonçalves & Patrícia Lopes, 2014. "Accounting in Agriculture: Disclosure practices of listed firms," FEP Working Papers 530, Universidade do Porto, Faculdade de Economia do Porto.
    12. Andy Lardon & Marc Deloof, 2014. "Financial disclosure by SMEs listed on a semi-regulated market: evidence from the Euronext Free Market," Small Business Economics, Springer, vol. 42(2), pages 361-385, February.
    13. Arrunada, Benito & Paz-Ares, Candido, 1997. "Mandatory rotation of company auditors: A critical examination," International Review of Law and Economics, Elsevier, vol. 17(1), pages 31-61, March.
    14. Ibrahim, Awad Elsayed Awad & Hussainey, Khaled & Nawaz, Tasawar & Ntim, Collins & Elamer, Ahmed, 2022. "A systematic literature review on risk disclosure research: State-of-the-art and future research agenda," International Review of Financial Analysis, Elsevier, vol. 82(C).
    15. Bamber, Matthew & McMeeking, Kevin & Petrovic, Nikola, 2018. "Mandatory Financial Reporting Processes and Outcomes," The International Journal of Accounting, Elsevier, vol. 53(3), pages 227-245.
    16. Khandelwal, Chandni & Kumar, Satish & Madhavan, Vinodh & Pandey, Nitesh, 2020. "Do board characteristics impact corporate risk disclosures? The Indian experience," Journal of Business Research, Elsevier, vol. 121(C), pages 103-111.
    17. Breuer, Matthias & Le, Anthony & Vetter, Felix, 2023. "Audit mandates, audit firms, and auditors," Working Papers 333, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    18. Vitolla, Filippo & Raimo, Nicola & Campobasso, Francesco & Giakoumelou, Anastasia, 2023. "Risk disclosure in sustainability reports: Empirical evidence from the energy sector," Utilities Policy, Elsevier, vol. 82(C).
    19. Devalle, Alain & Rizzato, Fabio & Busso, Donatella, 2016. "Disclosure indexes and compliance with mandatory disclosure—The case of intangible assets in the Italian market," Advances in accounting, Elsevier, vol. 35(C), pages 8-25.
    20. Lopes, Patricia Teixeira & Rodrigues, Lucia Lima, 2007. "Accounting for financial instruments: An analysis of the determinants of disclosure in the Portuguese stock exchange," The International Journal of Accounting, Elsevier, vol. 42(1), pages 25-56.

    More about this item

    Keywords

    Derivatives; Financial instruments; Hedge Accounting; Company Specific Characteristics;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:90213. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.