Information About Future Cash Flows in Fair Value Disclosures of Equity and Debt Securities of Property-Liability Insurance Companies

Posted: 29 May 1995

See all articles by Kathy R. Petroni

Kathy R. Petroni

Michigan State University - Eli Broad College of Business and Eli Broad Graduate School of Management

James Michael Wahlen

Indiana University - Kelley School of Business - Department of Accounting

Abstract

This study analyzes the relation between fair values of equity and fixed maturity debt securities and future cash flows of property-liability insurance companies. We find that fair values of equity investments U.S. Government bonds and municipal bonds are explained by future cash flows to these securities after controlling for book values and differences in risk. However fair values for corporate and other bonds are not reliable predictors of future cash flows. The results of this study contribute to the ongoing debate over the relevance and reliability of fair value disclosures of assets and liabilities. In particular these results shed some light on prior research on the valuation of implications of fair value estimates of investments (Barth 1994 Petroni and Wahlen 1995).

JEL Classification: M41, G12

Suggested Citation

Petroni, Kathy Ruby and Wahlen, James Michael, Information About Future Cash Flows in Fair Value Disclosures of Equity and Debt Securities of Property-Liability Insurance Companies. Available at SSRN: https://ssrn.com/abstract=55485

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)

James Michael Wahlen (Contact Author)

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2658 (Phone)
812-855-8679 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,704
PlumX Metrics