DERIVATIVE INSTRUMENTS ON EMISSION ALLOWANCES: FACTORS INFLUENCING DISCLOSURE IN PORTUGUESE COMPANIES

• Autor(a) principal: Monteiro, Sonia
• Data de Publicação: 2022
• Outros Autores: Lemos, Kátia, Ribeiro, Verónica, Florindo, Ana
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/11110/2496
• topic: Emission licenses on gases; derivative instruments; carbon market; disclosure index

Purpose: With the evolution of the European Union Emission Trading System (EU ETS), which foresees that the emission licenses will no longer be allocated free of charge and will be negotiated at auction, it is expected that there will be an increase in the trading of derivative instruments on licenses, to cover any risks of future price fluctuations, and therefore an increase in disclosure in this area.T his article aims to analyze the degree of disclosure of information on Derivative instruments on Emission Allowances, analyzing the degree of compliance with the underlying accounting regulations, and their determinants factors. Design/methodology/approach: The study will focus on a sample of companies operating in Portugal, which are part of the National Emission Licensing Plan (PNALE) I and II. The methodology used in this study was the content analysis of the Reports and Accounts of the sample entities over a 12-year period, based on the creation of disclosure indexes for the topics under analysis.This is a longitudinal study that seeks to address possible changes in the behaviour of companies' reporting practices in the periods 2008-2102 and 2013-2020 (corresponding to the 2nd and 3rd phases of the EU ETS). Findings: The results of the derivative disclosure index, in general, is higher (average IDGD is 0.81), although it is still very low when it specifically refers to derivative instruments for risk hedging related to emission licenses (IDL_LE = 0.11). Contrary to expectations, not only companies do not use this type of instrument to cover the risk of fluctuations in the price of licenses, nor is the change in the behaviour of companies between the 2nd and 3rd EU ETS periods significant. Regarding the explanatory factors studied, there is only a statistically positive correlation between the disclosure index and profitability. Research, Practical & Social implications: This study contributes to the understanding of disclosure practices on derivative instruments related to licenses in large Portuguese companies and may be useful for the various users of financial information and for accounting standardization bodies. Originality/value: As far as we know, previous studies related to the disclosure of derivative instruments for gas emission licenses are non-existent, so our study represents a contribution to the advancement of the literature in this area.