Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/145132
Authors: 
Kisseleva, Katja
Lorenz, Daniela
Year of Publication: 
2016
Series/Report no.: 
ESMT Working Paper 16-03
Abstract: 
This paper investigates whether, and if so, to what extent, Level 3 fair values disclosed by European banks provide useful information to investors and are reflected in firm value changes. Using a unique sample of 416 hand-collected firm-year observations from European banks reporting under IFRS, in contrast to previous research conducted in the US, we find no overall evidence that changes in Level 3 fair values are associated with changes in firm value. However, the value relevance of Level 3 fair values depends on the category assigned to financial instruments. Level 3 fair values that are held for trading are reflected in firm value. Further analyses suggest that this effect is driven predominantly by banks that operate in market-based economies and hire audit firms with deep industry expertise.
Subjects: 
Fair value
financial instruments
value relevance
banks
JEL: 
M41
N20
Document Type: 
Working Paper

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