ABSTRACT
The
study examined the effect of
hedge accounting on the financial performance of listed deposit money banks in
Nigeria. The specific objectives of
the study were; to examine the effect of hedge accounting (derivative asset
and derivative liability) on the return on asset of listed commercial banks in
Nigeria, to determine the effect of hedge accounting (derivative asset and
derivative liability) on the return on equity of listed commercial banks in
Nigeria, to examine the effect of hedge accounting (derivative asset and
derivative liability) on earnings per share of listed commercial banks in
Nigeria and to ascertain the effect of hedge accounting (derivative asset and
derivative liability) on profit after tax of listed commercial banks in
Nigeria. To achieve the objectives of
the study the ex-post facto research design was adopted. For this study,
secondary data was used through the use of annual reports and accounts of the
selected commercial banks. The population of the study was made up of 14 listed
commercial banks as at December 2020 while the sample size was 10 selected
banks. Data was analyzed using panel data regression analysis. The finding
revealed that (i) Hedge accounting (derivative asset and derivative liability)
has no significant effect on the return on asset of listed commercial banks in
Nigeria, (ii) Hedge accounting (derivative asset and derivative liability) has
a significant effect on the return on equity of listed commercial banks in
Nigeria, (iii)Hedge accounting
(derivative asset and derivative liability) has no significant effect on
earnings per share of listed commercial banks in Nigeriaand (iv)Hedge accounting (derivative asset and derivative
liability) has a significant effect on profit after tax of listed commercial
banks in Nigeria. Based on the findings, the study recommended that banks
should improve on accounting for hedging through derivative by fully adopting
the prescription made by IFRS 7 and 9, this will give confidence to intending investors
and in turn increase the return on asset of banks in Nigeria. Also, more funds
should be committed to the use of derivatives for hedging against interest rate
fluctuations that possibly affects the earnings of the banks.
TABLE OF CONTENTS
Title Page i
Declaration page ii
Certification iii
Dedication iv
Acknowledgement v
Table of content vi
Abstract x
CHAPTER 1: INTRODUCTION
1.1 Background
to the Study 1
1.3 Objectives
of the Study 6
1.4 Research Questions 7
1.5 Research Hypotheses 7
1.6 Significance of the
Study 8
1.7 Scope of
the Study 9
1.8 Limitations of the Study 9
1.9 Operational Definition of
Terms 9
CHAPTER 2: REVIEW OF RELATED LITERATURE
2.1 Conceptual
Framework 11
2.1.1 Concept
of hedging 11
2.1.2 Benefits
of hedge accounting 13
2.1.3 Hedging
techniques 15
2.1.5 Concept of derivative
accounting 19
2.1.5.1 Uses
of derivatives 25
2.1.6
Dealing with problems of derivatives valuation 31
2.1.7
Accounting of derivatives
32
2.1.7.1
Accounting for derivative under SFAS (161) 32
2.1.7.2
Accounting for derivatives under IFRS 9 34
2.2.1 Optimal hedging theory 41
2.2.2 Manager’s personal utility maximization
theory. 41
2.3 Empirical
Review 43
2.4 Summary of
Literature Review 61
2.5 Gap in
Literature 62
CHAPTER 3: METHODOLOGY
3.1 Research Design 63
3.2
Area of the Study 63
3.3 Population of the Study 63
3.4
Sample and Sample Size Determination 63
3.5
Method of data Collection and Data Sources 64
3.6 Data
analysis Technique 64
3.7 Model Specification 65
3.8
Description of the Variables of the Study: 65
CHAPTER 4: DATA PRESENTATION, ANALYSIS AND DISCUSSION
OF FINDINGS
4.1 Data
Presentation 67
4.2 Pre-estimation Tests 67
4.2.1 Stationarity/ unit root
tests 67
4.2.2 Cointegration test results 68
4.3 Data
Analysis 72
4.3.1 Hausman
test for hypothesis one 72
4.3.2 Panel
data test 73
4.3.3 Hausman
test for hypothesis two 74
4.3.4 Data
analysis for hypothesis two 75
4.3.5 Hausman
test for hypothesis three 76
4.3.7 Data
analysis for hypothesis three 77
4.3.5 Hausman
test for hypothesis four 79
4.3.7 Data
analysis for hypothesis four 80
4.4 Discussion
on Results 81
CHAPTER
5: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings 84
5.2 Conclusion 84
5.3 Recommendations 85
5.4 Contribution to Knowledge 86
5.5 Area of Further Research
86
References 87
Appendices 98
LIST OF TABLES
Page
4.1. Augmented Dickey Fuller
(ADF) Test 67
4.2: Table for co-integration test 68
4.3 Descriptive statistics 69
4.4: Hausman result for hypothesis one 72
4.5: Regression Result for hypothesis one 73
4.6: Hausman result for hypothesis two 74
4.7: Regression Result for hypothesis two 75
4.8: Hausman result for hypothesis three 76
4.9: Regression Result for hypothesis three 77
4.10: Hausman result for hypothesis four 79
4.11: Regression Result for
hypothesis four 80
CHIKEZIE, C (2023). Effect Of Hedge Accounting On The Financial Performance Of Listed Deposit Money Banks In Nigeria. Repository.mouau.edu.ng: Retrieved Sep 07, 2024, from https://repository.mouau.edu.ng/work/view/effect-of-hedge-accounting-on-the-financial-performance-of-listed-deposit-money-banks-in-nigeria-7-2
CHIKEZIE, CHIKEZIE. "Effect Of Hedge Accounting On The Financial Performance Of Listed Deposit Money Banks In Nigeria" Repository.mouau.edu.ng. Repository.mouau.edu.ng, 31 Aug. 2023, https://repository.mouau.edu.ng/work/view/effect-of-hedge-accounting-on-the-financial-performance-of-listed-deposit-money-banks-in-nigeria-7-2. Accessed 07 Sep. 2024.
CHIKEZIE, CHIKEZIE. "Effect Of Hedge Accounting On The Financial Performance Of Listed Deposit Money Banks In Nigeria". Repository.mouau.edu.ng, Repository.mouau.edu.ng, 31 Aug. 2023. Web. 07 Sep. 2024. < https://repository.mouau.edu.ng/work/view/effect-of-hedge-accounting-on-the-financial-performance-of-listed-deposit-money-banks-in-nigeria-7-2 >.
CHIKEZIE, CHIKEZIE. "Effect Of Hedge Accounting On The Financial Performance Of Listed Deposit Money Banks In Nigeria" Repository.mouau.edu.ng (2023). Accessed 07 Sep. 2024. https://repository.mouau.edu.ng/work/view/effect-of-hedge-accounting-on-the-financial-performance-of-listed-deposit-money-banks-in-nigeria-7-2