Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study

Chu Yeong Lim; Gary Pan; Kevin Ow Yong

doi:doi:10.11648/j.jfa.20200804.15

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Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study

Chu Yeong Lim, Gary Pan, Kevin Ow Yong

Published in Journal of Finance and Accounting (Volume 8, Issue 4)

Received: 19 June 2020 Accepted: 16 July 2020 Published: 5 August 2020

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Abstract

Prior research suggests there are significant differences in how investors perceive the reliability of fair values. An unaddressed question in this stream of research is whether cross-country differences in institutional factors can mediate differences in reliability for the fair value hierarchy measurements. We contribute to the research on fair value accounting by examining the impact of institutional factors toward the perceived reliability of fair value measurements in an international context. Based on an international sample of banks across twenty different countries, we find that the probability of crash risk is lower among countries with better financial development infrastructure, greater level of trust, tighter security regulations and higher level of disclosure requirements. These results apply to Level 1 assets but not to Level 2 and Level 3 assets. We also document that these cross-country factors improve the trading volume of our sample banks. Our study provides early evidence suggesting that fair value measurements across the fair value hierarchy are impacted by a country’s institutional background and financial development as well as the extent of its securities regulation and disclosure level. Our study suggests that there are ongoing concerns toward opaque fair values which are not fully eliminated by institutional differences. In addition, these differences matter in influencing investor willingness to trade in these stocks.

Published in	Journal of Finance and Accounting (Volume 8, Issue 4)
DOI	10.11648/j.jfa.20200804.15
Page(s)	199-207
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Fair Value Accounting, Institutional Factors, Reliability

References

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APA Style

Chu Yeong Lim, Gary Pan, Kevin Ow Yong. (2020). Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study. Journal of Finance and Accounting, 8(4), 199-207. https://doi.org/10.11648/j.jfa.20200804.15

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ACS Style

Chu Yeong Lim; Gary Pan; Kevin Ow Yong. Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study. J. Finance Account. 2020, 8(4), 199-207. doi: 10.11648/j.jfa.20200804.15

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AMA Style

Chu Yeong Lim, Gary Pan, Kevin Ow Yong. Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study. J Finance Account. 2020;8(4):199-207. doi: 10.11648/j.jfa.20200804.15

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@article{10.11648/j.jfa.20200804.15,
  author = {Chu Yeong Lim and Gary Pan and Kevin Ow Yong},
  title = {Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study},
  journal = {Journal of Finance and Accounting},
  volume = {8},
  number = {4},
  pages = {199-207},
  doi = {10.11648/j.jfa.20200804.15},
  url = {https://doi.org/10.11648/j.jfa.20200804.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20200804.15},
  abstract = {Prior research suggests there are significant differences in how investors perceive the reliability of fair values. An unaddressed question in this stream of research is whether cross-country differences in institutional factors can mediate differences in reliability for the fair value hierarchy measurements. We contribute to the research on fair value accounting by examining the impact of institutional factors toward the perceived reliability of fair value measurements in an international context. Based on an international sample of banks across twenty different countries, we find that the probability of crash risk is lower among countries with better financial development infrastructure, greater level of trust, tighter security regulations and higher level of disclosure requirements. These results apply to Level 1 assets but not to Level 2 and Level 3 assets. We also document that these cross-country factors improve the trading volume of our sample banks. Our study provides early evidence suggesting that fair value measurements across the fair value hierarchy are impacted by a country’s institutional background and financial development as well as the extent of its securities regulation and disclosure level. Our study suggests that there are ongoing concerns toward opaque fair values which are not fully eliminated by institutional differences. In addition, these differences matter in influencing investor willingness to trade in these stocks.},
 year = {2020}
}

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TY  - JOUR
T1  - Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study
AU  - Chu Yeong Lim
AU  - Gary Pan
AU  - Kevin Ow Yong
Y1  - 2020/08/05
PY  - 2020
N1  - https://doi.org/10.11648/j.jfa.20200804.15
DO  - 10.11648/j.jfa.20200804.15
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 199
EP  - 207
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20200804.15
AB  - Prior research suggests there are significant differences in how investors perceive the reliability of fair values. An unaddressed question in this stream of research is whether cross-country differences in institutional factors can mediate differences in reliability for the fair value hierarchy measurements. We contribute to the research on fair value accounting by examining the impact of institutional factors toward the perceived reliability of fair value measurements in an international context. Based on an international sample of banks across twenty different countries, we find that the probability of crash risk is lower among countries with better financial development infrastructure, greater level of trust, tighter security regulations and higher level of disclosure requirements. These results apply to Level 1 assets but not to Level 2 and Level 3 assets. We also document that these cross-country factors improve the trading volume of our sample banks. Our study provides early evidence suggesting that fair value measurements across the fair value hierarchy are impacted by a country’s institutional background and financial development as well as the extent of its securities regulation and disclosure level. Our study suggests that there are ongoing concerns toward opaque fair values which are not fully eliminated by institutional differences. In addition, these differences matter in influencing investor willingness to trade in these stocks.
VL  - 8
IS  - 4
ER  -

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Author Information

Chu Yeong Lim

Nanyang Business School, Nanyang Technological University, Singapore
Gary Pan

School of Accountancy, Singapore Management University, Singapore
Kevin Ow Yong

Design and Specialized Business Cluster, Singapore Institute of Technology, Singapore

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APA Style

Chu Yeong Lim, Gary Pan, Kevin Ow Yong. (2020). Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study. Journal of Finance and Accounting, 8(4), 199-207. https://doi.org/10.11648/j.jfa.20200804.15

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ACS Style

Chu Yeong Lim; Gary Pan; Kevin Ow Yong. Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study. J. Finance Account. 2020, 8(4), 199-207. doi: 10.11648/j.jfa.20200804.15

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AMA Style

Chu Yeong Lim, Gary Pan, Kevin Ow Yong. Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study. J Finance Account. 2020;8(4):199-207. doi: 10.11648/j.jfa.20200804.15

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@article{10.11648/j.jfa.20200804.15,
  author = {Chu Yeong Lim and Gary Pan and Kevin Ow Yong},
  title = {Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study},
  journal = {Journal of Finance and Accounting},
  volume = {8},
  number = {4},
  pages = {199-207},
  doi = {10.11648/j.jfa.20200804.15},
  url = {https://doi.org/10.11648/j.jfa.20200804.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20200804.15},
  abstract = {Prior research suggests there are significant differences in how investors perceive the reliability of fair values. An unaddressed question in this stream of research is whether cross-country differences in institutional factors can mediate differences in reliability for the fair value hierarchy measurements. We contribute to the research on fair value accounting by examining the impact of institutional factors toward the perceived reliability of fair value measurements in an international context. Based on an international sample of banks across twenty different countries, we find that the probability of crash risk is lower among countries with better financial development infrastructure, greater level of trust, tighter security regulations and higher level of disclosure requirements. These results apply to Level 1 assets but not to Level 2 and Level 3 assets. We also document that these cross-country factors improve the trading volume of our sample banks. Our study provides early evidence suggesting that fair value measurements across the fair value hierarchy are impacted by a country’s institutional background and financial development as well as the extent of its securities regulation and disclosure level. Our study suggests that there are ongoing concerns toward opaque fair values which are not fully eliminated by institutional differences. In addition, these differences matter in influencing investor willingness to trade in these stocks.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Differences in the Reliability of Fair Value Hierarchy Measurements: A Cross-Country Study
AU  - Chu Yeong Lim
AU  - Gary Pan
AU  - Kevin Ow Yong
Y1  - 2020/08/05
PY  - 2020
N1  - https://doi.org/10.11648/j.jfa.20200804.15
DO  - 10.11648/j.jfa.20200804.15
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 199
EP  - 207
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20200804.15
AB  - Prior research suggests there are significant differences in how investors perceive the reliability of fair values. An unaddressed question in this stream of research is whether cross-country differences in institutional factors can mediate differences in reliability for the fair value hierarchy measurements. We contribute to the research on fair value accounting by examining the impact of institutional factors toward the perceived reliability of fair value measurements in an international context. Based on an international sample of banks across twenty different countries, we find that the probability of crash risk is lower among countries with better financial development infrastructure, greater level of trust, tighter security regulations and higher level of disclosure requirements. These results apply to Level 1 assets but not to Level 2 and Level 3 assets. We also document that these cross-country factors improve the trading volume of our sample banks. Our study provides early evidence suggesting that fair value measurements across the fair value hierarchy are impacted by a country’s institutional background and financial development as well as the extent of its securities regulation and disclosure level. Our study suggests that there are ongoing concerns toward opaque fair values which are not fully eliminated by institutional differences. In addition, these differences matter in influencing investor willingness to trade in these stocks.
VL  - 8
IS  - 4
ER  -

Copy | Download