Market Value Accounting

Posted: 11 May 2000

See all articles by Maureen O'Hara

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management

Abstract

This paper analyzes the effects of market value accounting (MVA) on loan maturity. The author shows that in the presence of asymmetric information MVA introduces a bias into asset valuation against longer-term illiquid assets. This bias increases interest rates for long-maturity loans and induces a shift to short-term self-liquidating loans. With the liquidity production of banks curtailed, borrowers may face "excessive" liquidation. The desirability of MVA applied to loans is thus questionable.

JEL Classification: G21, G28, M41

Suggested Citation

O'Hara, Maureen, Market Value Accounting. JOURNAL OF FINANCIAL INTERMEDIATION, Vol 3 No 1, 1994. Available at SSRN: https://ssrn.com/abstract=5711

Maureen O'Hara (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3645 (Phone)
607-255-5993 (Fax)

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