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The Impact of Fair Value Measurement for Bank Assets on Information Asymmetry and the Moderating Effect of Own Credit Risk Gains and Losses

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@article{6102bc4dc5dd4efdaebca02ed7492e15,
title = "The Impact of Fair Value Measurement for Bank Assets on Information Asymmetry and the Moderating Effect of Own Credit Risk Gains and Losses",
abstract = "We examine whether the use of fair value measurement (FVM) for bank assets reduces information asymmetry among equity investors (bid-ask spread) and how this is affected by the recognition of own credit risk gains and losses (OCR). Our findings show that FVM of assets is associated with noticeably lower information asymmetry and that this reduction is more than twice as large when banks also recognize OCR. In addition, we find that the bid-ask spread is incrementally lower for banks that provide more detailed narrative disclosures on OCR. The findings also indicate that the effects of asset FVM and OCR recognition on the bid-ask spread do not simply capture the differences in the characteristics of the banks and the quality of their information environments.",
keywords = "mixed-attribute model, own credit risk, fair value option, financial instruments, IAS 39, banks",
author = "Fontes, {Joana Cardoso} and Argyro Panaretou and Peasnell, {Kenneth Vincent}",
year = "2018",
month = nov,
doi = "10.2308/accr-52070",
language = "English",
volume = "93",
pages = "127--147",
journal = "The Accounting Review",
issn = "0001-4826",
publisher = "American Accounting Association",
number = "6",

}

RIS

TY - JOUR

T1 - The Impact of Fair Value Measurement for Bank Assets on Information Asymmetry and the Moderating Effect of Own Credit Risk Gains and Losses

AU - Fontes, Joana Cardoso

AU - Panaretou, Argyro

AU - Peasnell, Kenneth Vincent

PY - 2018/11

Y1 - 2018/11

N2 - We examine whether the use of fair value measurement (FVM) for bank assets reduces information asymmetry among equity investors (bid-ask spread) and how this is affected by the recognition of own credit risk gains and losses (OCR). Our findings show that FVM of assets is associated with noticeably lower information asymmetry and that this reduction is more than twice as large when banks also recognize OCR. In addition, we find that the bid-ask spread is incrementally lower for banks that provide more detailed narrative disclosures on OCR. The findings also indicate that the effects of asset FVM and OCR recognition on the bid-ask spread do not simply capture the differences in the characteristics of the banks and the quality of their information environments.

AB - We examine whether the use of fair value measurement (FVM) for bank assets reduces information asymmetry among equity investors (bid-ask spread) and how this is affected by the recognition of own credit risk gains and losses (OCR). Our findings show that FVM of assets is associated with noticeably lower information asymmetry and that this reduction is more than twice as large when banks also recognize OCR. In addition, we find that the bid-ask spread is incrementally lower for banks that provide more detailed narrative disclosures on OCR. The findings also indicate that the effects of asset FVM and OCR recognition on the bid-ask spread do not simply capture the differences in the characteristics of the banks and the quality of their information environments.

KW - mixed-attribute model

KW - own credit risk

KW - fair value option

KW - financial instruments

KW - IAS 39

KW - banks

U2 - 10.2308/accr-52070

DO - 10.2308/accr-52070

M3 - Journal article

VL - 93

SP - 127

EP - 147

JO - The Accounting Review

JF - The Accounting Review

SN - 0001-4826

IS - 6

ER -