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Fair value accounting and value relevance of equity book value and net income for European financial firms during the crisis

Adwan, Sami and Alhaj-Ismail, Alaa and Girardone, Claudia (2020) 'Fair value accounting and value relevance of equity book value and net income for European financial firms during the crisis.' Journal of International Accounting, Auditing and Taxation, 39. p. 100320. ISSN 1061-9518

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Abstract

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.

Item Type: Article
Additional Information: Source info: Journal of International Accounting, Auditing and Taxation. 2020 DOI:ACCAUD_100320
Uncontrolled Keywords: Value Relevance; Fair Value; Financial Crisis; Financial Firms
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 26 May 2020 08:14
Last Modified: 21 May 2022 01:00
URI: http://repository.essex.ac.uk/id/eprint/27572

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