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The Value Relevance and Timeliness of Write-downs During the Financial Crisis of 2007–2009

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  • Beltratti, Andrea
  • Spear, Nasser
  • Szabo, Mark Daniel

Abstract

This study examines the value relevance and timeliness of write-downs reported by North American and European banks during the financial crisis of 2007–2009. Our study extends Vyas (2011), considering the association between write-downs and stock returns to evaluate the performance of fair value standards during the crisis. Specifically, we investigate claims that strict enforcements of standards resulted in write-downs that were excessive or unnecessary due to temporary market price distortions, or conversely, that standards were flexible enough to allow managers to engage in earnings or capital management. Our empirical results show that both fair-value and aggregate write-downs are associated dollar-for-dollar with contemporaneous security returns, suggesting that, on average, write-downs were timely throughout the financial crisis.

Suggested Citation

  • Beltratti, Andrea & Spear, Nasser & Szabo, Mark Daniel, 2013. "The Value Relevance and Timeliness of Write-downs During the Financial Crisis of 2007–2009," The International Journal of Accounting, Elsevier, vol. 48(4), pages 467-494.
    • Handle: RePEc:eee:accoun:v:48:y:2013:i:4:p:467-494
    DOI: 10.1016/j.intacc.2013.10.008
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    Cited by:

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    3. Adwan, Sami & Alhaj-Ismail, Alaa & Girardone, Claudia, 2020. "Fair value accounting and value relevance of equity book value and net income for European financial firms during the crisis," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 39(C).
    4. Beatty, Anne & Liao, Scott, 2014. "Financial accounting in the banking industry: A review of the empirical literature," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 339-383.

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    More about this item

    Keywords

    Write-downs; Subprime financial crisis; Fair-value accounting; Value relevance; Timeliness;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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