Note(s): This table reports the cross-sectional variations in the effect of financial reporting on corporate hedging activities. The dependent variable is the hedging intensity. EQs are financial reporting quality measures, with higher values in EQs indicating lower financial reporting quality. The partitioning variable is the Herfindahl–Hirschman index (HH index) or price-cost margin (Lerner index) that measures the product market competition. We partition the sample in a year into two subsets and assign the indicator variable high to be one when the firm is classified to be located in a competitive industry (i.e. the negative HH index is larger than the annual median or the negative Lerner index is larger than the annual industry-wide median). Due to the construction similarity between a firm’s profitability and price-cost margin, the control variable profit is omitted to avoid multicollinearity. The model includes industry (based on the Fama and French 48 industry classification) and year fixed effects. t-statistics are reported in parentheses and are based on standard errors adjusted for clustering at the firm and year level. ***, ** and * indicate significance levels of 1, 5 and 10%, respectively

Source(s): The authors