The usefulness of derivative disclosures for investment decision-making: Perceptions of Chinese institutional investors

Huang, Zhen; Gao, Simon

Abstract

Purpose – The purpose of this study is to examine the usefulness of derivative disclosures from the
perspective of Chinese institutional investors in relation to their investment decision-making.
Design/methodology/approach – This study uses semi-structured interviews with 21 institutional
investors based in China including 10 funds managers and 11 professional analysts.
Findings – This study finds that the information on the use of derivatives disclosed by listed
companies in China is generally perceived to be useful to Chinese institutional investors (e.g. funds
managers and professional analysts) in facilitating their investment decisions, although such
information is generally thought to be less significant compared to other fundamental financial
information such as assets, liabilities and profits/losses. It also finds that the current provisions of
derivatives-related information by Chinese listed companies are largely unsatisfied primarily because
of insufficient information and the lack of timely disclosures. Furthermore, it finds that the accounting
and reporting policies currently imposed in China appear to be little understood by Chinese investors.
Research limitations/implications – This study has its own limitations due to the approach of
interviews with a relatively small sample from only two investment firms in China.
Practical implications – The findings from the study provide a number of policy implications for
derivatives regulators and accounting standards setters.
Originality/value – This study is the first study of its kind to investigate the perceptions of Chinese
institutional investors on the usefulness of derivatives reporting and disclosures with the use of
interview research method.

Citation

Huang, Z., & Gao, S. (2014). The usefulness of derivative disclosures for investment decision-making: Perceptions of Chinese institutional investors. Journal of Chinese Economic and Foreign Trade Studies, 7(3), 173-192. https://doi.org/10.1108/jcefts-02-2015-0009

• Journal Article Type: Article
• Publication Date: Oct 6, 2014
• Deposit Date: May 7, 2015
• Journal: Journal of Chinese Economic and Foreign Trade Studies
• Print ISSN: 1754-4408
• Publisher: Emerald
• Peer Reviewed: Peer Reviewed
• Volume: 7
• Issue: 3
• Pages: 173-192
• DOI: https://doi.org/10.1108/jcefts-02-2015-0009
• Keywords: Derivatives; Accounting standards; Derivative disclosures
• Public URL: http://researchrepository.napier.ac.uk/id/eprint/8009
• Publisher URL: http://dx.doi.org/10.1108/JCEFTS-02-2015-0009