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Board characteristics and the value relevance of fair values

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  • Jimi Siekkinen

    (Hanken School of Economics)

Abstract

This study investigates whether board characteristics affect the value relevance of fair value estimates in financial firms under International Financial Reporting Standard (IFRS) 13. Specifically, the study will focus on whether a better and more efficient monitoring of managers, after the adoption of this new regulation, has an effect on the information quality of fair values. IFRS 13 requires firms to disclose a fair value hierarchy containing three levels: Level 1 (quoted prices in active markets), Level 2 (inputs other than quoted prices that are observable either directly or indirectly) and Level 3 (unobservable inputs generated by entities). The results indicate that, in a post IFRS 13 era, board independence and gender diversity have a positive effect on the value relevance of fair value estimates (Level 3). In addition, firms with larger boards have lower information quality of firm-generated fair value estimates. Moreover, initial analysis shows that all fair values are value relevant to investors and the adoption of IFRS 13 has blurred the lines between the three levels in the fair value hierarchy. Hence, IFRS 13 has successfully reduced the information asymmetry related to fair value estimates.

Suggested Citation

  • Jimi Siekkinen, 2017. "Board characteristics and the value relevance of fair values," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(2), pages 435-471, June.
    • Handle: RePEc:kap:jmgtgv:v:21:y:2017:i:2:d:10.1007_s10997-016-9350-8
    DOI: 10.1007/s10997-016-9350-8
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    2. Alessandro Mechelli & Riccardo Cimini, 2021. "The effect of corporate governance and investor protection environments on the value relevance of new accounting standards: the case of IFRS 9 and IAS 39," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(4), pages 1241-1266, December.
    3. Mehnaz, Laura & Rahman, Asheq & Kabir, Humayun, 2023. "Covenant violation concern and investors’ pricing of Level 3 fair value adjustments," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(3).

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