Market Value Accounting

O'Hara, Maureen

Abstract

Market Value Accounting

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management

JOURNAL OF FINANCIAL INTERMEDIATION, Vol 3 No 1, 1994

Abstract:
This paper analyzes the effects of market value accounting (MVA) on loan maturity. The author shows that in the presence of asymmetric information MVA introduces a bias into asset valuation against longer-term illiquid assets. This bias increases interest rates for long-maturity loans and induces a shift to short-term self-liquidating loans. With the liquidity production of banks curtailed, borrowers may face "excessive" liquidation. The desirability of MVA applied to loans is thus questionable.

JEL Classification: G21, G28, M41

Accepted Paper Series

Date posted: May 11, 2000

Suggested Citation

O'Hara, Maureen, Market Value Accounting. JOURNAL OF FINANCIAL INTERMEDIATION, Vol 3 No 1, 1994. Available at SSRN: http://ssrn.com/abstract=5711

Contact Information

Maureen O'Hara (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3645 (Phone)
607-255-5993 (Fax)