This paper examines whether and how the level of exposure to fair value accounting moderates the changes in the value relevance of equity book value and net income during a crisis period. Using a sample of European listed financial firms over 2005-2011, our analysis confirms prior literature that the value relevance of book value of equity increases, while that of net income decreases during the financial crisis. More importantly, our findings offer robust support for the hypothesis that the impact of the crisis is less pronounced for firms whose financial statements are more exposed to fair value accounting. This evidence can be explained by the increased valuation weight placed by investors on the book value of equity relative to net income for firms with more exposure to fair value in the pre-crisis period.
|Number of pages||12|
|Journal||Journal of International Accounting, Auditing and Taxation|
|Early online date||21 May 2020|
|Publication status||Published - Jun 2020|
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- Value Relevance
- Fair Value
- Financial Crisis
- Financial Firms
- Financial firms
- Fair value
- Value relevance
- Financial crisis
ASJC Scopus subject areas