Risk management disclosure practices of UK non-financial firms after FRS13.

In the United Kingdom Financial Reporting Standard (FRS) 13, which came into force for March 1999 yearends,
requires narrative and numerical disclosure of all financial instruments held or issued, in order to provide
information about their impact on the firm’s risk profile. We use this information to examine the interest rate
and currency profile of financial liabilities and assets. We find that UK firms on average have a greater
proportion of assets and liabilities tied to floating rates of interest and that they tend to match the interest rate profile of assets and liabilities. Although sterling liabilities on average represent over half of total liabilities, for firms holding sterling and non-sterling debt the US dollar was the dominant currency. We also find a relationship between the level of foreign operations and foreign debt. Since the foreign debt profile is disclosed
after the effect of derivatives, this result suggests that cross-currency swaps are used for hedging.