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Fair Value Reporting Standards and Market Volatility

Author

Listed:
  • Guillaume Plantin

    (Tepper School of Business - CMU - Carnegie Mellon University [Pittsburgh])

  • Haresh Sapra

    (University of Chicago)

  • Hyun Song Shin

    (Princeton University)

Abstract

[Début du chapitre] One of the most important public policy debates in recent years has been the reform of accounting standards toward "fair value" accounting. Financial institutions, especially banks and insurance companies, have been at the forefront of this debate and have been the most vocal opponents of this reform. Judging from the intensity of the arguments and the controversy that this reform has generated, there is clearly much more at stake than what may appear to be esoteric measurement issues. We review the main strands of this debate, and describe a framework of analysis that can weigh up the arguments on both sides. Far from being an esoteric debate, issues of measurement have a far reaching influence on the behaviour of financial institutions, and determine to a large extent the efficiency of the price mechanism in guiding real decisions.

Suggested Citation

  • Guillaume Plantin & Haresh Sapra & Hyun Song Shin, 2004. "Fair Value Reporting Standards and Market Volatility," Post-Print hal-03462309, HAL.
    • Handle: RePEc:hal:journl:hal-03462309
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03462309
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    File URL: https://sciencespo.hal.science/hal-03462309/document
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    References listed on IDEAS

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    1. Neil Doherty & Kent Smetters, 2005. "Moral Hazard in Reinsurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(3), pages 375-391, September.
    2. Stephen Morris & Hyun Song Shin, 2004. "Liquidity Black Holes," Review of Finance, European Finance Association, vol. 8(1), pages 1-18.
    3. Franklin Allen & Douglas Gale, 2003. "Financial Fragility, Liquidity and Asset Prices," Center for Financial Institutions Working Papers 01-37, Wharton School Center for Financial Institutions, University of Pennsylvania.
    4. O'Hara Maureen, 1993. "Real Bills Revisited: Market Value Accounting and Loan Maturity," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 51-76, October.
    5. Michael J. Fleming & Eli M. Remolona, 1999. "Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information," Journal of Finance, American Finance Association, vol. 54(5), pages 1901-1915, October.
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    Cited by:

    1. Bernard, Carole & Boyle, Phelim P., 2011. "A Natural Hedge for Equity Indexed Annuities," Annals of Actuarial Science, Cambridge University Press, vol. 5(2), pages 211-230, September.
    2. Bikki Jaggi & James P. Winder & Cheng-Few Lee, 2010. "Is There a Future for Fair Value Accounting After the 2008–2009 Financial Crisis?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 469-493.

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