The Transparency of Derivative Disclosures by Australian Firms in the Extractive Industries

Hassan, Mohamat S., Percy, Majella, & Stewart, Jenny D. (2006) The Transparency of Derivative Disclosures by Australian Firms in the Extractive Industries. Corporate Governance and Control, 4(2), pp. 257-270.


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.

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ID Code: 2365
Item Type: Journal Article
Refereed: Yes
Additional Information:
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Keywords: Disclosure quality, transparency, derivatives, extractive industries
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2006 Virtus InterPress
Copyright Statement: Reproduced in accordance with the copyright policy of the publisher.
Deposited On: 08 Feb 2007 00:00
Last Modified: 10 Aug 2011 17:38

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