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The Federal Energy Regulatory Commission and derivatives

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  • Karen Nunez

Abstract

Purpose - The purpose of this study is to investigate the value‐relevance of regulatory financial reporting requirements for jurisdictional public utilities, natural gas companies and oil pipelines in the USA. Design/methodology/approach - An event study methodology is used to examine the stock market's response to regulatory accounting and reporting requirements. Also, the explanatory power of regulatory disclosures pertaining to fair values of on‐balance sheet derivatives is tested. Findings - The empirical findings suggest the market responded favorably to the regulatory requirements, and the accounting and reporting changes are perceived as useful to investors in equity valuation. Originality/value - This study extends the prior research by addressing the value relevance of disaggregated disclosures for on‐balance sheet derivatives. The results are generalizable to other standard setting environments, particularly in foreign markets that have experienced rapid growth in derivatives markets in recent years.

Suggested Citation

  • Karen Nunez, 2012. "The Federal Energy Regulatory Commission and derivatives," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 10(1), pages 55-72, June.
    • Handle: RePEc:eme:jfrapp:v:10:y:2012:i:1:p:55-72
    DOI: 10.1108/19852511211237444
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    References listed on IDEAS

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    1. Thomas T. Cheng, 1986. "Standard setting and security returns: A time series analysis of FAS No. 8 events," Contemporary Accounting Research, John Wiley & Sons, vol. 3(1), pages 226-241, September.
    2. Hirst, DE & Hopkins, PE, 1998. "Comprehensive income reporting and analysts' valuation judgments," Journal of Accounting Research, Wiley Blackwell, vol. 36, pages 47-75.
    3. Richard R. Simonds & Daniel W. Collins, 1978. "Line of Business Reporting and Security Prices: An Analysis of an SEC Disclosure Rule: Comment," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 646-658, Autumn.
    4. Li Wang & Pervaiz Alam & Stephen Makar, 2005. "The Value-Relevance of Derivative Disclosures by Commercial Banks: A Comprehensive Study of Information Content Under SFAS Nos. 119 and 133," Review of Quantitative Finance and Accounting, Springer, vol. 25(4), pages 413-427, December.
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