Effect of Hedge Accounting on Profitability of Listed Commercial Banks in Nigeria
Department of Accounting, College of Management sciences,
Michael Okpara University of Agriculture Umudike. Umuahia, Abia State.
This study examined the effect of hedge accounting on financial performance of listed commercial banks in Nigeria. Ten banks were selected based on the availability of needed data for the study. Data on Return on Assets, Derivative Assets and Derivative liabilities were extracted from the financial reports of the commercial banks from 2014 to 2019 and analyzed using panel regression technique. The results revealed that Derivative Assets have significant and positive effect on Return on Asset while Derivative Liabilities were found to have negative and significant effect on Return on Assets of listed commercial banks in Nigeria. The study recommends that commercial banks in Nigeria should increase the use of hedge derivative instruments to minimize risks and improve profitability by going for future, forward, swap and option derivative contract and by employing experts’
valuators of hedge contracts, and that prior assessment of various derivatives should be carried out to significantly hedge against the market risks that result from market volatility and profitability of banks in Nigeria.
Keywords: Hedge accounting, derivative assets, derivative liability, profitability