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Hedge accounting and its influence on financial hedging: when the tail wags the dog
Authors:Martin Glaum  André Klöcker
Institution:1. Justus-Liebig-University Giessen, Department of International Accounting , Licher Strasse 62, 35394, Giessen, Germany martin.glaum@wirtschaft.uni-giessen.de;3. Justus-Liebig-University Giessen, Department of International Accounting , Licher Strasse 62, 35394, Giessen, Germany
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.
Keywords:hedge accounting  hedging  IAS 39  derivatives  risk management  SFAS 133
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