Essays on maturity gap disclosures by commercial banks

This study examines the efficacy of commercial banks' derivatives and interest rate risk disclosures in the form of maturity gap. In particular, it investigates (1) if financial analysts have incorporated such information into their forecasts of earnings, and (2) if stock market participants use such information in the pricing of equity securities.; The first set of tests establishes the relation among commercial banks' earnings, derivatives and maturity gap measures. The results suggest that the one-year maturity gap, one-year repricing assets and derivatives are jointly significant in explaining the cross-sectional variation in commercial banks' earnings. This finding should prompt financial analysts to consider such factors in their forecasting process.; The study investigates whether financial analysts are efficient in incorporating derivatives and maturity gap information through the association between forecast errors and such disclosed information. The research design differs markedly from other studies in that it uses the difference between the actual interest rates and the corresponding interest rates implied by a derivative contract. The forecast errors are premised on such a measure of interest income surprise that stems from unexpected interest rate changes.; The hypothesis that financial analysts are efficient with respect to derivatives and maturity gap disclosures is rejected. The results reveal a significant relation among forecast errors, derivatives and maturity gap disclosures. The empirical evidence is consistent with financial analysts overreacting to interest income surprise generated by interest rate surprise, and commercial banks' asset and liability position. Nevertheless, the magnitude of forecast errors attributable to derivatives and maturity gap disclosures is economically immaterial.; An alternative specification confirms that financial analysts are not efficient with respect to derivatives and maturity gap disclosures.; The study also examines whether investors use the derivatives and maturity gap disclosures through the association between commercial banks' stock price, and derivatives and maturity gap disclosures. The research design distinguishes two roles of maturity gap: profitability and earnings variability. The empirical results are not strong.; Overall, the study documents empirical evidence that the financial analysts and investors do not use the derivatives and maturity gap disclosures efficiently. (Abstract shortened by UMI.)...