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Hedge accounting and its influence on financial hedging: when the tail wags the dog

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  • Martin Glaum
  • André Klöcker

Abstract

We analyse the application of hedge accounting and its influence on hedging behaviour in German and Swiss non-financial corporations. Of our sample companies, 72% apply hedge accounting. The likelihood of its use is associated with frequency of derivatives usage, size, IFRS experience, perceived importance of reduced earnings volatility and low growth opportunities. More than half of the companies using hedge accounting indicate that the accounting rules influence their hedging behaviour. Companies are more likely to be affected if they use derivatives only occasionally, are smaller, are highly leveraged, have dispersed shareholding, have fewer growth opportunities and hedge selectively.

Suggested Citation

  • Martin Glaum & André Klöcker, 2011. "Hedge accounting and its influence on financial hedging: when the tail wags the dog," Accounting and Business Research, Taylor & Francis Journals, vol. 41(5), pages 459-489, December.
    • Handle: RePEc:taf:acctbr:v:41:y:2011:i:5:p:459-489
    DOI: 10.1080/00014788.2011.573746
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    Cited by:

    1. Dömötör, Barbara & Bihary, Zsolt, 2018. "Menedzserösztönzők hatása a vállalati fedezésre [Manager incentives-based model of corporate hedging]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 701-710.
    2. Philippe Touron, 2016. "Mesures de la performance et les autres éléments du résultat global (OCI) : état de l'art," Post-Print hal-01902529, HAL.
    3. Brigitte Eierle & Sven Hartlieb & Andreas Kress & Francesco Mazzi, 2021. "Hedge Accounting and Firms’ Future Investment Spending," Working Papers - Business wp2021_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    4. Dennis Frestad, 2018. "Managing earnings risk under SFAS 133/IAS 39: the case of cash flow hedges," Review of Quantitative Finance and Accounting, Springer, vol. 51(1), pages 159-197, July.
    5. Krapl, Alain & Salyer, Robert, 2017. "The effects of fair value reporting on corporate foreign exchange exposures," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 215-238.

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