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Fair Value-related Information in Analysts’ Decision Processes: Evidence from the Financial Crisis

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  • Jannis Bischof
  • Holger Daske
  • Christoph Sextroh

Abstract

We use a sample of conference calls and analyst research reports from international banks to examine how financial analysts request and communicate fair value-related information in their valuation process. We find that analysts devote considerable attention to fair value-related topics. Most of the conference call questions and references in research reports pertain to fair value reclassifications and fair value changes of liabilities resulting from banks’ own credit risk. The accounting impact of these one-time effects during the financial crisis and a lack of corresponding firm disclosures help to explain the prevalence of these two topics. The content of the questions and references suggests that analysts have different motives for their interest in fair value-related information. While some analysts adjust reported earnings for unrecognised fair value changes of reclassified assets, most of the observed analysts exclude banks’ own credit risk effects from reported earnings. Thus, the use of fair value-related information varies substantially across analysts and across instruments.

Suggested Citation

  • Jannis Bischof & Holger Daske & Christoph Sextroh, 2014. "Fair Value-related Information in Analysts’ Decision Processes: Evidence from the Financial Crisis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(3-4), pages 363-400, April.
    • Handle: RePEc:bla:jbfnac:v:41:y:2014:i:3-4:p:363-400
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    6. Niclas Hellman & Jordi Carenys & Soledad Moya Gutierrez, 2018. "Introducing More IFRS Principles of Disclosure – Will the Poor Disclosers Improve?," Accounting in Europe, Taylor & Francis Journals, vol. 15(2), pages 242-321, May.
    7. Devrimi Kaya & Christian Maier & Tobias Böhmer, 2020. "Empirische Kapitalmarktforschung zu Conference Calls: Eine Literaturanalyse [Empirical Capital Market Research on Conference Calls: A Literature Review]," Schmalenbach Journal of Business Research, Springer, vol. 72(2), pages 183-212, June.
    8. Lin Liao & Helen Kang & Richard D. Morris, 2021. "The value relevance of fair value and historical cost measurements during the financial crisis," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2069-2107, April.
    9. Cascino, Stefano & Daske, Holger & Defond, Mark & Florou, Annita & Gassen, Joachim & Hung, Mingyi, 2023. "Reflections on the 20-year anniversary of worldwide IFRS adoption," LSE Research Online Documents on Economics 120205, London School of Economics and Political Science, LSE Library.
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