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Valuation Specialist, Earnings Persistent and Level 3 Fair Value Measurements

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  • Chen Bu
  • Yuyu Zhang
  • Daifei Yao

Abstract

We investigate the significance of valuation specialists within audit teams in shaping the association between earnings persistence and banks' exposure to Level 3 fair value measurements (FVMs). Using a sample of international banks, we find that a bank's exposure to Level 3 FVMs improves earnings persistence only when auditors engage valuation specialists for Level 3 FVMs. Our findings suggest that valuation specialists are more likely to complement auditors' expertise in auditing Level 3 FVMs, thereby enhancing the reliability of audited Level 3 FVMs and strengthening the association between earnings persistence and Level 3 FVMs.

Suggested Citation

  • Chen Bu & Yuyu Zhang & Daifei Yao, 2025. "Valuation Specialist, Earnings Persistent and Level 3 Fair Value Measurements," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(3), pages 2866-2893, September.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:3:p:2866-2893
    DOI: 10.1111/acfi.70022
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    References listed on IDEAS

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