Market pricing of banks' fair value assets reported under SFAS 157 since the 2008 financial crisis

Beng Wee Goh, Dan Li, Tee Yong Ng, Kevin Ow Yong

Research output: Journal article publicationJournal articleAcademic researchpeer-review

68 Citations (Scopus)


We investigate how investors price the fair value estimates of assets as required by Statement of Financial Accounting Standards No. 157 (SFAS 157) since the financial crisis in 2008. We observe that Level 3 fair value estimates are typically priced lower than Level 1 and Level 2 fair value estimates between 2008 and 2011. However, the difference between the pricing of the different estimates reduces over time, suggesting that as market conditions stabilize in the aftermath of the 2008 financial crisis, reliability concerns about Level 3 estimates dissipated to some extent. Next, we examine whether Level 3 gains affect the pricing of Level 3 estimates because managers have discretion to use Level 3 gains to manage earnings and asset values upwards. We find that differences in Level 3 gains do not lead investors to price Level 3 estimates differently. Finally, we find evidence that the pricing of the Level 1 and Level 2 fair value estimates of assets is lower for banks with lower capital adequacy. Overall, our study contributes to an improved understanding of the relation between valuation and fair value information.
Original languageEnglish
Pages (from-to)129-145
Number of pages17
JournalJournal of Accounting and Public Policy
Issue number2
Publication statusPublished - 1 Jan 2015
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Sociology and Political Science

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