Information externalities of sfas 161: Evidence from supply chains

Jing Chen, Yiwei Dou, Youli Zou

Research output: Contribution to journalArticlepeer-review


Effective in 2009, SFAS 161 requires enhanced disclosures about derivative use and hedging activities. We test for changes to the information environment of firms whose disclosure policy is unaffected by this standard directly. Using a sample of non-users of derivatives, we find an increase in stock liquidity after their critical customers expand derivative disclosures under SFAS 161. The effect persists for one year and becomes insignificant in subsequent years as the firms dial back their voluntary disclosure. The effect is also more salient for firms that have stronger economic links with their customers and for firms whose customers exhibit more significant improvements in derivative disclosures. The findings suggest that the mandatory derivative disclosures due to SFAS 161 lead to short-term positive information externalities along supply chains.

Original languageEnglish
Pages (from-to)179-202
Number of pages24
JournalAccounting Review
Issue number4
StatePublished - Jul 2021

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


  • Disclosure regulation
  • Hedge accounting
  • Information externalities
  • Market liquidity
  • SFAS 161
  • Supply chains

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