| Summary: | 碩士 === 雲林科技大學 === 會計系研究所 === 99 === The Financial Accounting Standards Board in Taiwan issued and enforced Statement of Financial Accounting Standards No.34 in 2006 (hereafter, FASB NO.34). This standard triggers more transparent disclosure of accounting information. Prior studies reveal that managers can use derivatives to avoid business risk and to reduce earnings volatility. However, the motivation of derivatives usage can be divided into hedging and speculation. Thus, this study is motivated to classify derivatives users as a “hedger” and a “speculator” and then investigates the effect of derivatives usage on earnings volatility.
The empirical results show that “hedger” derivatives user has lower earnings volatility. It reveals that managers can use derivatives to hedge and reduce interest rate, foreign exchange rate and commodity price risk of changes. In addition, it is found that firms seem to enhance risk management policies and efficiently reduce the cash flow volatility after FASB No.34.
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