An Investigation of Capital Market Reactions to Pronouncements on Fair Value Accounting
Posted: 29 May 1995
This paper examines the impact of twenty-three pronouncements related to the proposed fair value accounting (FVA) rules on equity prices of financial institutions. The results document that announcements which signaled an increased (decreased) probability of enactment of FVA produced negative (positive) abnormal stock price reactions for the sample banks. Further the magnitude of the stock price reactions are negatively related to the banks' primary capital ratio and positively related to the ratio of the book or market value of the investment portfolio to total assets and the ratio of the difference between the market and book value of the investment portfolio of total assets.
JEL Classification: M41
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