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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
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| Title: | | Did fair-value accounting contribute to the financial crisis?  |
| 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 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CFS Working Paper Series, Universität Frankfurt a. M.
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