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Information content of SFAS 157 fair value reporting

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  • Elbannan, Mohamed A.
  • Elbannan, Mona A.

Abstract

This paper examines whether SFAS 157 fair value hierarchy information is associated with stock price synchronicity and whether the relation is moderated by the quality of the firm's information environment. If SFAS 157 information is useful, stock prices of reporting firms should incorporate more firm-specific information and hence exhibit lower synchronicity (measured as the R2 from a market model regression). The sample consists of 3538 firm-years of listed firms reporting SFAS 157 fair values during the period 2008–2009. Evidence suggests that synchronicity is negatively related to aggregate fair values, that the relation does not monotonically change across the fair value levels, and stock prices of firms with ex ante higher quality information environment exhibit weaker differences between fair value levels in their effect on synchronicity. Finally, we further partition the sample into financial and non-financial firms and find that liabilities (assets) are viewed as having a stronger impact on these cash flows than assets (liabilities) in the case of financial (non-financial) firms.

Suggested Citation

  • Elbannan, Mohamed A. & Elbannan, Mona A., 2015. "Information content of SFAS 157 fair value reporting," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 25(C), pages 31-45.
    • Handle: RePEc:eee:jiaata:v:25:y:2015:i:c:p:31-45
    DOI: 10.1016/j.intaccaudtax.2015.10.001
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    1. Jonnergård, Karin & von Koch, Christopher & Nilsson, Ola, 2020. "Information environment – An exploration and clarification of the concept based on prior literature," Advances in accounting, Elsevier, vol. 50(C).
    2. Hsu, Audrey Wen-hsin & Pourjalali, Hamid & Song, Yi-Ju, 2018. "Fair value disclosures and crash risk," Journal of Contemporary Accounting and Economics, Elsevier, vol. 14(3), pages 358-372.

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