Effect of Hedge Accounting on Profitability of Listed Commercial Banks in Nigeria

1 Nwosuocha, L.I. & 2 Prof Ihendinihu, J.U.
Department of Accounting, College of Management sciences,
Michael Okpara University of Agriculture Umudike. Umuahia, Abia State. 1 Corresponding
author’s E-mail: lovenwosuocha@gmail.com

This study examined the effect of hedge accounting on profitability of listed commercial banks in
Nigeria. Ten (10) banks were selected based on the availability of needed data for the study. Data
on Return on Assets (ROA), Derivative Assets (DA) and Derivative liabilities (DL) were extracted
from the financial reports of the commercial banks from 2014 to 2019 and analyzed using panel
regression statistical technique. The results revealed that Derivative Assets has a significant and
positive effect on Return on Asset (ROA) of listed commercial banks in Nigeria. Derivative
Liabilities was found to have negative and significant effect on Return on Assets (ROA) of listed
commercial banks in Nigeria. The study recommends that commercial banks in Nigeria should
enhance 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.
Keywords: Derivative assets, derivative liability and profitability

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