The Value Relevance of Equity Method Fair Value Disclosures

24 Pages Posted: 4 Oct 2003

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

Abstract

We assess the valuation implications of the fair value disclosures made for publicly traded securities accounted for under the equity method. We test the association between investors' stock price metrics and fair value disclosures while controlling for book values on a sample of 172 investor firm-years during 1993-1997. Our results indicate that the information in the fair value disclosures is incremental to the information provided by both an investment's equity method book value and equity method reported income. This suggests that there is nothing unique about investments in publicly traded common stock that involve significant influence that makes the fair value disclosures irrelevant for firm valuation.

JEL Classification: M41, M45, G12

Suggested Citation

Graham, Roger C. and Lefanowicz, Craig E. and Petroni, Kathy Ruby, The Value Relevance of Equity Method Fair Value Disclosures. Journal of Business Finance & Accounting, Vol. 30, pp. 1065-1088, September 2003. Available at SSRN: https://ssrn.com/abstract=437913

Roger C. Graham (Contact Author)

Oregon State University ( email )

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

Craig E. Lefanowicz

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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