EconStor >
Goethe-Universität Frankfurt am Main >
Center for Financial Studies (CFS), Universität Frankfurt a. M.  >
CFS Working Paper Series, Universität Frankfurt a. M. >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/43199
  
Title:Did fair-value accounting contribute to the financial crisis? PDF Logo
Authors:Laux, Christian
Leuz, Christian
Issue Date:2009
Series/Report no.:CFS Working Paper 2009/22
Abstract:The recent financial crisis has led to a major debate about fair-value accounting. Many critics have argued that fair-value accounting, often also called mark-to-market accounting, has significantly contributed to the financial crisis or, at least, exacerbated its severity. In this paper, we assess these arguments and examine the role of fair-value accounting in the financial crisis using descriptive data and empirical evidence. Based on our analysis, it is unlikely that fair-value accounting added to the severity of the current financial crisis in a major way. While there may have been downward spirals or asset-fire sales in certain markets, we find little evidence that these effects are the result of fair-value accounting. We also find little support for claims that fair-value accounting leads to excessive write-downs of banks' assets. If anything, empirical evidence to date points in the opposite direction, that is, towards overvaluation of bank assets.
Subjects:Mark-to-Market Accounting
Financial Institutions
Liquidity
Financial Crisis, Banks
Financial Regulation
Procyclicality
Contagion
JEL:G14
G15
G30
K22
M41
M42
Persistent Identifier of the first edition:urn:nbn:de:hebis:30-72719
Document Type:Working Paper
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

Files in This Item:
File Description SizeFormat
615087957.pdf295.91 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/43199

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.