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

Purpose – The purpose of this study is to examine the usefulness of derivative disclosures from theperspective of Chinese institutional investors in relation to their investment decision-making.Design/methodology/approach – This study uses semi-structured interviews with 21 institutionalinvestors 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 listedcompanies in China is generally perceived to be useful to Chinese institutional investors (e.g. fundsmanagers and professional analysts) in facilitating their investment decisions, although suchinformation is generally thought to be less significant compared to other fundamental financialinformation such as assets, liabilities and profits/losses. It also finds that the current provisions ofderivatives-related information by Chinese listed companies are largely unsatisfied primarily becauseof insufficient information and the lack of timely disclosures. Furthermore, it finds that the accountingand 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 ofinterviews 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 forderivatives regulators and accounting standards setters.Originality/value – This study is the first study of its kind to investigate the perceptions of Chineseinstitutional investors on the usefulness of derivatives reporting and disclosures with the use ofinterview research method