Fair Value Hierarchy in Financial Instruments Disclosure - Is There Transparency for Investors? Evidence from the Banking Industry

Journal of Governance and Regulation, Vol. 1, No. 4, 2012

16 Pages Posted: 30 Sep 2012 Last revised: 13 Nov 2012

See all articles by Enrico Laghi

Enrico Laghi

University of Rome I

Sabrina Pucci

University of Rome III

Marco Tutino

Roma Tre University - Department of Business Studies

Michele Di Marcantonio

University of Rome I

Date Written: September 1, 2012

Abstract

The debate on fair value accounting is still open although last 20 years have been spent in searching for solution by academician, practitioners and institutions. After a long and continuous discussion both on the basic concepts and the information level contained in fair value measurements and on the different solutions that is possible to adopt in mark to market measurements, IASB and FASB have recently issued new standards on fair value measurements applying some principles not only to financial instruments but also to property and other investments. To verify if the solutions adopted in these Standards really improve the disclosure level and the 'usefulness of data for investors', this paper tries to analyze the actual level of transparency and the 'usefulness' of the 'fair value hierarchy' (that for some aspects synthesized the Boards way of thinking referring to fair value) that has been already introduced for financial instruments by IFRS 7, Financial Instruments: Diclosure.

The paper presents results of an empirical investigation on a sample of domestic and foreign listed banks who adopted fair value hierarchy in line with SFAS 157 and IFRS 7 recommendations. Research questions can be summarized as follows: (i) does fair value hierarchy improve transparency in financial instruments evaluation in banks annual report or it can be considered as a tool for earnings management?

Keywords: fair value hierarchy, fair value measurement, IFRS7, disclosure requirements

JEL Classification: M41, G31

Suggested Citation

Laghi, Enrico and Pucci, Sabrina and Tutino, Marco and Di Marcantonio, Michele, Fair Value Hierarchy in Financial Instruments Disclosure - Is There Transparency for Investors? Evidence from the Banking Industry (September 1, 2012). Journal of Governance and Regulation, Vol. 1, No. 4, 2012. Available at SSRN: https://ssrn.com/abstract=2153645

Enrico Laghi

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

Sabrina Pucci

University of Rome III ( email )

Via Ostiense, 159
Rome, RM 00154
Italy

Marco Tutino (Contact Author)

Roma Tre University - Department of Business Studies ( email )

Via Silvio D'amico, 77
Rome, Rome 00145
Italy

Michele Di Marcantonio

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

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