Value-Relevance of Banks' Fair Value Disclosures Under SFAS 107

Posted: 8 Jul 1998

See all articles by Mary E. Barth

Mary E. Barth

Stanford University - Graduate School of Business

William H. Beaver

Stanford University

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Abstract

This study examines the relation between fair value disclosures under Statement of Financial Accounting Standards No. 107 (SFAS 107) and bank share prices. Our goal is to determine whether fair value disclosures explain cross-sectional variation in bank common share prices beyond that provided by the reported book value of common equity and other potentially informative disclosures in a way consistent with our predictions. As predicted, we find that fair values of securities and loans possess significant incremental explanatory power and are reflected positively in bank share prices. However, contrary to our predictions, the fair values of deposits, long-term debt, and off-balance sheet items provide no incremental explanatory power. One specification that includes a proxy for "core deposit" intangibles -- a variables not covered by SFAS 107 -- indicates that core deposits are reflected positively in bank share prices.

Note: Never entered as working paper. Gail Pratt 7/8/98

JEL Classification: M41, G12, G14

Suggested Citation

Barth, Mary E. and Beaver, William H. and Landsman, Wayne R., Value-Relevance of Banks' Fair Value Disclosures Under SFAS 107. Available at SSRN: https://ssrn.com/abstract=105728

Mary E. Barth

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
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William H. Beaver

Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-4409 (Phone)
650-725-6152 (Fax)

Wayne R. Landsman (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

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