Derivatives Usage And Stock Price Synchronicity

Derivatives are more and more widely used in listed companies because of their risk hedging function.However,due to the complexity and high-risk characteristics of derivatives,many companies made huge loss during derivatives usage.What is the impact of companies using derivatives has been widely concerned in academic circles,but the existing research mainly focuses on the company level and pays less attention to the impact of the derivatives usage on capital market.Due to the complexity of the economic essence and accounting of derivatives,it is difficult to distinguish the real motivation of companies to use derivatives.Whether using derivatives has an impact on transmitting company specific information and how can it affect stock price have not been fully concerned.Stock price synchronicity represents the extent to which company specific information is integrated into the stock price.The content of company specific information and information transmission mechanism in stock price reflect the information efficiency of capital market.Therefore,it’s of great significance to study the relationship between derivatives usage and stock price synchronicity and the information transmission mechanism.In 2017,the Ministry of Finance revised the accounting standards related to financial instruments to standardize the accounting treatment and financial reporting,and improve the quality of accounting information.Based on the new financial instrument standards and existing literature,this paper uses the effective market theory,principal agent theory,information asymmetry theory and signal transmission theory to analyze the relationship between derivatives usage and stock price synchronicity and the information transmission mechanism,and discuss how the new financial instrument standards affect them.Taking A-share listed companies from 2015 to 2020 as a sample,this paper uses the least square method to establish a multiple linear regression model to empirically test the theoretical assumptions of this paper.The results show that:(1)Derivatives usage is positively correlated with stock price synchronicity.(2)The implementation of the new financial instrument standards weaken the positive correlation between derivatives usage and stock price synchronicity.(3)The intermediary effect test finds that derivatives usage increases information asymmetry and then improves the stock price synchronicity.Information asymmetry has a partial mediating effect on the relationship between derivatives usage and stock price synchronicity.After the implementation of the new financial instrument standards,the increase in information asymmetry caused by derivatives is mitigated.(4)The moderating effect test finds that in the companies with lower management shareholding ratio and higher analysts’ forecasts dispersion,the more the derivatives usage impoves stock price synchronicity,and after the new financial instruments standard,the relationship is no longer significant.(5)The heterogeneity test finds that in the group with low information disclosure level and low audit quality,derivatives usage can better improve the stock price synchronicity.This relationship is more significant before the implementation of the new financial instruments standard,and after that,it is no longer significant.(6)Further research finds that among companies applying derivatives,the use of hedge accounting can better improve the stock price synchronicity.This relationship is no longer significant after the implementation of the new financial instrument standards.The conclusions provide a reference for accounting standards to further refine and standardize information disclosure of derivatives,companies to strengthen the application of new standards,and government departments to strengthen the guidance and implementation of new standards.