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The effects of corporate governance and accounting rule changes on derivatives usage

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  • Ching-Lung Chen
  • Hung-Shu Fan
  • Ya-Ming Yang

Abstract

The ongoing growth in use of financial instruments together with the accompanying disclosing requirements debate has motivated this study to examine the role of internal corporate governance and accounting rule changes in firms’ derivatives using derisions. The empirical results reveal that firms with better internal corporate governance have higher demand on hedging-purpose derivatives usage in Taiwan. Moreover, the magnitude of hedging-purpose derivatives usage significantly decreases following the enforcement of SFAS No. 34. It is also found that firms with better internal corporate governance are moderate negatively associated with the non-hedging-purpose derivatives usage and the effect of SFAS No. 34 is statistically insignificant in this testing. This study implements several diagnostic checks and demonstrates the results are robust to various specifications. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Ching-Lung Chen & Hung-Shu Fan & Ya-Ming Yang, 2014. "The effects of corporate governance and accounting rule changes on derivatives usage," Review of Derivatives Research, Springer, vol. 17(3), pages 323-353, October.
    • Handle: RePEc:kap:revdev:v:17:y:2014:i:3:p:323-353
    DOI: 10.1007/s11147-014-9100-5
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    2. Trapp, Rouven & Weiß, Gregor N.F., 2016. "Derivatives usage, securitization, and the crash sensitivity of bank stocks," Journal of Banking & Finance, Elsevier, vol. 71(C), pages 183-205.

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    More about this item

    Keywords

    G32; G34; M48;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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