Title: The usefulness of derivative-related disclosure: evidence from major Australian banks

Authors: Steven Li, Simon S. Gao

Addresses: IGSB and School of Commerce, Division of Business, University of South Australia, Adelaide, SA 5001, Australia. ' School of Accounting, Economics and Statistics, Napier University, Craiglockhart Campus, Edinburgh, EH14 1DJ, UK

Abstract: In recent years, there has been an increasing public demand for firms, especially financial institutions, to disclose more information related to derivatives due to a series of high profile financial scandals. A number of countries have established accounting and reporting standards for derivative instruments. Limited research on the usefulness and quality of derivative related disclosures are mostly based on the US. This paper examines the usefulness of derivative related disclosure in the Australian banking sector. We first review the policy and requirements for derivative related disclosures in the Australian banking sector. Then we investigate the usefulness of derivative related disclosures based on a sample from major Australian banks. Our preliminary empirical results reveal that the disclosure of principal amounts and credit disclosure appear to be insignificant to stock returns. However, the disclosures of fair gains and losses for both trading and non-trading derivatives are significant to the stock returns.

Keywords: derivatives; disclosure; Australian banks; Australia; principal amounts; credit disclosure; stock returns; fair gains; losses.

DOI: 10.1504/IJAAPE.2007.016280

International Journal of Accounting, Auditing and Performance Evaluation, 2007 Vol.4 No.3, pp.248 - 262

Published online: 15 Dec 2007 *

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