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

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  • Bischof, Jannis
  • Wüstemann, Jens

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.

Suggested Citation

  • Bischof, Jannis & Wüstemann, Jens, 2007. "How does fair value measurement under IAS 39 affect disclosure choices of European banks?," Papers 07-75, Sonderforschungsbreich 504.
    • Handle: RePEc:mnh:spaper:2325
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    File URL: https://madoc.bib.uni-mannheim.de/2325/1/dp07_75.pdf
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    References listed on IDEAS

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    1. Nikolaos Eriotis & Theodoros Kounadeas & Dimitrios Vasiliou, 2019. "From IAS 39 To IFRS 9: Literature Review of Studies on the Implementation of IFRS in the European Banking Sector," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 9(3-4), pages 29-51.

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    More about this item

    Keywords

    Availability Effects ; Bank Disclosure ; Bank Regulation ; Fair Value ; Financial Instruments ; IAS 39 ; Presentation;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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