Abstract

This paper examine the effect of derivatives use and the magnitude of derivatives use on the accounting value relevance. Following prior research, the derivatives have an important role on risk hedge. That is, if company use derivatives, the quality of accounting information will be increased. Moreover several prior research suggest that firm characteristics, especially corporate governance, influence on relationship between derivatives use and quality of accounting information significantly. However, prior research do not consider the effect of derivatives on investor. When company choose systems or policies, they expect the positive effect and increase of market value. Therefore it will be needed to examine the effect on investor. In this paper, we examine the effect of derivatives from investor perspective and use the value relevance concept of accounting numbers. Our research results as follows. First, the derivatives use and magnitude of derivatives use have positive relationship with accounting information value relevance. Second, the corporate governance influence on the relationship between derivatives use and value relevance positively. Those results mean the derivatives are perceived by investor as positive factor and corporate governance have crucial role when manager decide policies.

Keywords

• Book Value
• Derivatives
• Net Income
• Value Relevance

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