Who's the Fairest of Them All? Evidence from Closed-End Funds

49 Pages Posted: 26 Sep 2013 Last revised: 24 Mar 2016

See all articles by Alastair Lawrence

Alastair Lawrence

London Business School / University of California, Berkeley

Subprasiri Siriviriyakul

City University of New York - Stan Ross Department of Accountancy

Richard G. Sloan

University of Southern California - Leventhal School of Accounting

Date Written: April 1, 2015

Abstract

Prior research examining the ASC 820 fair value hierarchy concludes that Level 3 fair value measurements are significantly less value relevant than Level 1 and Level 2 fair value measurements. We reevaluate this conclusion using the closed-end fund setting, in which fair value measurements are available for substantially all assets. Contrary to prior research, we find that Level 3 fair values are of similar value relevance to Level 1 and Level 2 fair values. Our findings suggest that the results in previous research are attributable to correlated omitted variable bias arising from the absence of fair value data for most assets.

Keywords: ASC 820, fair value measurement, Level 1, Level 2, Level 3, value relevance, timeliness, closed-end mutual funds

JEL Classification: M41, G12, G29

Suggested Citation

Lawrence, Alastair and Siriviriyakul, Subprasiri and Sloan, Richard G., Who's the Fairest of Them All? Evidence from Closed-End Funds (April 1, 2015). Accounting Review, Vol. 91 No. 1, 2016. Available at SSRN: https://ssrn.com/abstract=2330490 or http://dx.doi.org/10.2139/ssrn.2330490

Alastair Lawrence

London Business School / University of California, Berkeley ( email )

Regent's Park
London
United Kingdom

HOME PAGE: http://Www.alastairlawrence.net

Subprasiri Siriviriyakul

City University of New York - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States

Richard G. Sloan (Contact Author)

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

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