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An Experiment in the Economic Consequences of Additional Disclosure: The Case of the Fair Value of Unlisted Equity Investments

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Author Info

  • Yuan Ding

    (CEIBS - Europe International Business School)

  • Thomas Jeanjean

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959)

  • Cédric Lesage

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959)

  • Hervé Stolowy

    ()
    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959)

Abstract

We investigate the economic consequences of additional disclosure about assets with no active market in terms of liquidity, perception of information reliability and relevance. We use an experimental design: 181 MBA students are asked to value 24 investments. We manipulate the level of disclosure on the fair value of assets (Limited versus Full), the perception of expected profit (Gain versus Loss) and the firm's business risk (Low versus High). In the case of Limited (resp. Full) disclosure, participants are given a point estimate for the fair value of the investment (resp. plus a range of possible fair values). We find that in the Full disclosure situation, participants tend to make an offer more frequently, to bid prices lower than the fair value and to earn a lower return on their investments compared to the Limited disclosure case. These consequences vary with the environment (expected profit and risk).

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00458950.

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Date of creation: 2009
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Publication status: Published - Presented, La place de la dimension européenne dans la Comptabilité Contrôle Audit, 2009, Strasbourg, France
Handle: RePEc:hal:journl:halshs-00458950

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00458950/en/
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Related research

Keywords: fair value; fair value measurement; disclosure; relevance; reliability; risk; SFAS 157; IFRS 7;

References

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