Value-Relevance of Banks' Fair Value Disclosures Under SFAS No. 107

THE ACCOUNTING REVIEW, Vol 71, No 4, October 1996

Posted: 19 May 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 provides evidence that fair value estimates of loans, securities and long-term debt disclosed under SFAS No. 107 provide significant explanatory power for bank share prices beyond that provided by related book values. In contrast to Eccher et al. (1996) and Nelson (1996), we consistently find incremental explanatory power for loans' fair values. Relatively stronger findings are obtained using a set of significant conditioning variables, including nonperforming loans, and interest-sensitive assets and liabilities. The joint significance of these loan-related variables and loans' fair values indicates that loans' fair values do not reflect completely loan default and interest rate risk. The loans coefficient is significantly larger for banks with higher regulatory capital, which is consistent with market participants discounting unrealized gains on loans disclosed by less healthy banks. The findings are robust with respect to the inclusion of additional explanatory variables and to a first differences formulation.

JEL Classification: M41, G21

Suggested Citation

Barth, Mary E. and Beaver, William H. and Landsman, Wayne R., Value-Relevance of Banks' Fair Value Disclosures Under SFAS No. 107. THE ACCOUNTING REVIEW, Vol 71, No 4, October 1996, Available at SSRN: https://ssrn.com/abstract=2671

Mary E. Barth (Contact Author)

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9040 (Phone)
650-725-0468 (Fax)

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

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)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
3,180
PlumX Metrics