An Empirical Analysis of the Economic Implications of Fair Value Accounting for Investment Securities

Posted: 22 May 1995

See all articles by Anne Beatty

Anne Beatty

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Sandra Chamberlain

University of British Columbia (UBC) - Division of Accounting

Joseph Magliolo

Southern Methodist University (SMU) - Accounting Department

Abstract

This paper analyzes security returns of bank holding companies and insurance companies during periods surrounding the adoption of SFAS 115. We find that bank share prices were negatively affected by the examined events but find little share price reaction for insurance companies. Our evidence suggests that banks were adversely affected by the standard because of problems with the standard's market value accounting approach. Cross-sectional analysis of event period returns shows that banks that more frequently traded their investments and banks with longer maturing investments were the most negatively impacted by the standard. Further support of these cross-sectional results is provided by an analysis of actual investment behavior in the 1993-1994 period.

JEL Classification: M41

Suggested Citation

Beatty, Anne L. and Chamberlain, Sandra L. and Magliolo, Joseph, An Empirical Analysis of the Economic Implications of Fair Value Accounting for Investment Securities. Sauder School of Business Working Paper. Available at SSRN: https://ssrn.com/abstract=55477

Anne L. Beatty

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

Sandra L. Chamberlain

University of British Columbia (UBC) - Division of Accounting ( email )

2053 Main Hall
Vancouver, British Columbia V6T 1Z2
Canada
604-822-8531 (Phone)
604-822-9470 (Fax)

Joseph Magliolo (Contact Author)

Southern Methodist University (SMU) - Accounting Department ( email )

United States
214-768-1678 (Phone)
214-768-4099 (Fax)

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