How does fair value measurement under IAS 39 affect disclosure choices of European banks?

Bischof, Jannis ; Wüstemann, Jens

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URN: urn:nbn:de:bsz:180-madoc-23255
Document Type: Working paper
Year of publication: 2007
The title of a journal, publication series: Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung
Volume: 07-75
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: M41 G11 G21 K22 ,
Subject headings (SWD): Europa , Bankbilanz , Publizitätspflicht , Investor Relations , Fair-Value-Bewertung
Keywords (English): Availability Effects , Bank Disclosure , Bank Regulation , Fair Value , Financial Instruments , IAS 39 , Presentation
Abstract: There is a considerable degree of heterogeneity in the way how European banks present their financial instruments in IFRS financial statements. In a sample of 109 European banks, we identify three major presentation formats that are currently applied: a presentation by measurement category, by product, and by purpose. We find the use of the measurement categories, which were originally designed by IAS 39 for measurement purposes, as line items to be the prevalent choice across countries. We analyze the factors that could explain this disclosure choice. We find that a corresponding regulatory recommendation has a strong effect on the choice. We further find that the disclosure of measurement categories is negatively associated with the relative book value of financial assets measured at fair value. This finding suggests discretionary disclosure management by banks. We conclude, based on behavioral theory, that banks expect investors to have a negative bias in the risk perception of assets measured at fair value.
Additional information: This Version: April 7, 2008

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