Value-Relevance of Fair Value Disclosures for Investments in Securities Accounted for Under the Equity Method

22 Pages Posted: 9 Nov 1998

See all articles by Roger C. Graham

Roger C. Graham

Oregon State University

Craig E. Lefanowicz

University of Virginia - McIntire School of Commerce

Kathy R. Petroni

Michigan State University - Eli Broad College of Business and Eli Broad Graduate School of Management

Date Written: October 8, 1998

Abstract

The objective of this study is to test the value-relevance of disclosed fair values of investments in publicly-traded equity securities accounted for under the equity method. We test for an association between alternative stock price metrics and fair value disclosures after controlling for recognized book values for a sample of non-financial firms during 1993-1997. The results indicate that stock prices are consistently positively associated with the difference between disclosed fair values and recognized book values. The results suggest that standard setters' concerns that there are unique valuation implications for investments in common stock that involve significant influence may not be warranted.

JEL Classification: M41, M45, G12

Suggested Citation

Graham, Roger C. and Lefanowicz, Craig E. and Petroni, Kathy Ruby, Value-Relevance of Fair Value Disclosures for Investments in Securities Accounted for Under the Equity Method (October 8, 1998). Available at SSRN: https://ssrn.com/abstract=137398 or http://dx.doi.org/10.2139/ssrn.137398

Roger C. Graham

Oregon State University ( email )

424 Austen Hall
Corvallis, OR 97331
United States
541-737-4028 (Phone)
541-737-4890 (Fax)

Craig E. Lefanowicz (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-924-6356 (Phone)

Kathy Ruby Petroni

Michigan State University - Eli Broad College of Business and Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States
517-432-2924 (Phone)
517-432-1101 (Fax)

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