The transparency of derivative disclosures by Australian firms in the extractive industries

Mohamat Sabri Hassan, Majella Percy, Jenny Goodwin-Stewart

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

This paper investigates the transparency of derivative disclosures of Australian firms in the extractive industries using 1998 to 2001 financial reports. The quality of financial reporting has become a major corporate governance issue since the collapse of prominent companies such as Enron in the United States, HIH Insurance in Australia, and, of particular relevance here, Barings PLC in the United Kingdom, where the losses were caused by derivative instruments. Disclosure transparency is an important component of the quality of financial reporting. We measure transparency based on a disclosure index developed from AASB 1033 Presentation and Disclosure of Financial Instruments. We examine the relationship between transparency and firm characteristics represented by size, performance, growth opportunities, auditor and type of extractive firm. The results indicate that the transparency of derivative disclosures among firms in the extractive industries has increased over the period. However, there is still evidence of non-compliance with the disclosure requirements, especially in relation to net fair value. We find that firm size, price-earnings ratio and debt-to-equity ratio, and to a lesser extent, market-to-book ratio and profitability are associated with disclosure transparency.

Original languageEnglish
Pages (from-to)257-270
Number of pages14
JournalCorporate Ownership and Control
Volume4
Issue number2 C
Publication statusPublished - 2006

Fingerprint

Extractive industries
Disclosure
Transparency
Derivatives
Financial reporting
Corporate governance
Financial instruments
Growth opportunities
Disclosure index
Debt
Fair value
Book-to-market ratio
Insurance
Noncompliance
Disclosure requirements
Equity
Auditors
Firm characteristics
Enron
Profitability

Keywords

  • Derivatives
  • Disclosure quality
  • Extractive industries
  • Transparency

ASJC Scopus subject areas

  • Business, Management and Accounting(all)

Cite this

The transparency of derivative disclosures by Australian firms in the extractive industries. / Hassan, Mohamat Sabri; Percy, Majella; Goodwin-Stewart, Jenny.

In: Corporate Ownership and Control, Vol. 4, No. 2 C, 2006, p. 257-270.

Research output: Contribution to journalArticle

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