Abandoning the transactions-based accounting model: Weighing the evidence

Lys Thomas*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

I develop a benchmark for evaluating whether fair values disclosed by banks differ from investors' estimates of the market value of financial assets and liabilities. Using this benchmark, I conclude that the hypothesis that disclosed fair values closely approximate investors' estimates should be rejected. I present evidence suggesting that the procedure used in establishing fair values results in an understatement of the value of financial assets an an overstatement of liabilities. I also conclude that the reaction of bank stocks to the adoption of SFAS 105, 107, and 115 is more consistent with regulatory concerns and not with potential adverse effects of those statements for contracting.

Original languageEnglish (US)
Pages (from-to)155-175
Number of pages21
JournalJournal of Accounting and Economics
Volume22
Issue number1-3
DOIs
StatePublished - Jan 1 1996

Keywords

  • Bank regulation
  • Capital markets
  • Disclosure
  • Fair value accounting
  • Recognition

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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