Do analysts understand the economic and reporting complexities of derivatives?

• 成果类型: Article
• 署名作者: Chang, Hye Sun; Donohoe, Michael; Sougiannis, Theodore
• 署名单位: Singapore Management University; University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2015.07.005
• 发表日期: 2016
• 关键词: financial derivatives; FORECAST ACCURACY; sensitivity-analysis; propensity score; RISK-MANAGEMENT; DISCLOSURES; incentives; hedge; determinants; INFORMATION

摘要

We investigate whether and how the complexity of derivatives influences analysts' earnings forecast properties. Using a difference-in-differences design, we find that, relative to a matched control sample of non-users, analysts' earnings forecasts for new derivatives users are less accurate and more dispersed after derivatives initiation. These results do not appear to be driven by the economic complexity of derivatives, but rather the financial reporting of such economic complexity. Overall, despite their financial expertise, analysts routinely misjudge the earnings implications of firms' derivatives activity. However, we find evidence that a series of derivatives accounting standards has helped analysts improve their forecasts over time. (C) 2015 Elsevier B.V. All rights reserved.