Home > Research > Publications & Outputs > What can we learn about credit risk from debt v...

Research

Electronic data

  • DVA_Paper_Final_With title page

    Accepted author manuscript, 766 KB, PDF document

    Available under license: CC BY: Creative Commons Attribution 4.0 International License

Links

Text available via DOI:

Keywords

View graph of relations

What can we learn about credit risk from debt valuation adjustments?

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Published

Standard

What can we learn about credit risk from debt valuation adjustments? / Lin, Wen; Panaretou, Argyro; Pawlina, Grzegorz et al.
In: Review of Accounting Studies, Vol. 28, No. 4, 31.12.2023, p. 2556–2588.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Lin, W, Panaretou, A, Pawlina, G & Shakespeare, C 2023, 'What can we learn about credit risk from debt valuation adjustments?', Review of Accounting Studies, vol. 28, no. 4, pp. 2556–2588. https://doi.org/10.1007/s11142-022-09705-0

APA

Lin, W., Panaretou, A., Pawlina, G., & Shakespeare, C. (2023). What can we learn about credit risk from debt valuation adjustments? Review of Accounting Studies, 28(4), 2556–2588. https://doi.org/10.1007/s11142-022-09705-0

Vancouver

Lin W, Panaretou A, Pawlina G, Shakespeare C. What can we learn about credit risk from debt valuation adjustments? Review of Accounting Studies. 2023 Dec 31;28(4):2556–2588. Epub 2022 Jul 26. doi: 10.1007/s11142-022-09705-0

Author

Lin, Wen ; Panaretou, Argyro ; Pawlina, Grzegorz et al. / What can we learn about credit risk from debt valuation adjustments?. In: Review of Accounting Studies. 2023 ; Vol. 28, No. 4. pp. 2556–2588.

Bibtex

@article{0709b4e5097a442d86e6035620023838,
title = "What can we learn about credit risk from debt valuation adjustments?",
abstract = "Motivated by the debate about the introduction of the fair value option for (financial) liabilities (FVOL) and the requirement to recognize and separately disclose in financial statements debt valuation adjustments (DVAs), this study explores what we can learn about a firm{\textquoteright}s credit risk from DVAs. Using a sample of US bank holding companies that elect the FVOL, we show that DVAs generally cannot be explained by the same factors that explain contemporaneous changes in bank{\textquoteright}s credit quality. We further find that DVAs can explain future changes in credit risk when the fair value of liabilities is based on managerial inputs (Level 3). Overall our results suggest that managers have an information advantage in estimating credit risk and that DVAs provide inside information to the market.",
keywords = "Credit risk, Debt valuation adjustments, Fair value option, Financial liabilities",
author = "Wen Lin and Argyro Panaretou and Grzegorz Pawlina and Catherine Shakespeare",
year = "2023",
month = dec,
day = "31",
doi = "10.1007/s11142-022-09705-0",
language = "English",
volume = "28",
pages = "2556–2588",
journal = "Review of Accounting Studies",
issn = "1380-6653",
publisher = "Springer New York",
number = "4",

}

RIS

TY - JOUR

T1 - What can we learn about credit risk from debt valuation adjustments?

AU - Lin, Wen

AU - Panaretou, Argyro

AU - Pawlina, Grzegorz

AU - Shakespeare, Catherine

PY - 2023/12/31

Y1 - 2023/12/31

N2 - Motivated by the debate about the introduction of the fair value option for (financial) liabilities (FVOL) and the requirement to recognize and separately disclose in financial statements debt valuation adjustments (DVAs), this study explores what we can learn about a firm’s credit risk from DVAs. Using a sample of US bank holding companies that elect the FVOL, we show that DVAs generally cannot be explained by the same factors that explain contemporaneous changes in bank’s credit quality. We further find that DVAs can explain future changes in credit risk when the fair value of liabilities is based on managerial inputs (Level 3). Overall our results suggest that managers have an information advantage in estimating credit risk and that DVAs provide inside information to the market.

AB - Motivated by the debate about the introduction of the fair value option for (financial) liabilities (FVOL) and the requirement to recognize and separately disclose in financial statements debt valuation adjustments (DVAs), this study explores what we can learn about a firm’s credit risk from DVAs. Using a sample of US bank holding companies that elect the FVOL, we show that DVAs generally cannot be explained by the same factors that explain contemporaneous changes in bank’s credit quality. We further find that DVAs can explain future changes in credit risk when the fair value of liabilities is based on managerial inputs (Level 3). Overall our results suggest that managers have an information advantage in estimating credit risk and that DVAs provide inside information to the market.

KW - Credit risk

KW - Debt valuation adjustments

KW - Fair value option

KW - Financial liabilities

U2 - 10.1007/s11142-022-09705-0

DO - 10.1007/s11142-022-09705-0

M3 - Journal article

AN - SCOPUS:85134801132

VL - 28

SP - 2556

EP - 2588

JO - Review of Accounting Studies

JF - Review of Accounting Studies

SN - 1380-6653

IS - 4

ER -