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Market reaction to valuation adjustments for financial instruments: Evidence from Greece

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  • Ballas, Apostolos A.
  • Chalevas, Constantinos
  • Tzovas, Christos

Abstract

This paper investigates the accounting policy choice regarding unrealized gains or losses from securities and its pricing effects by examining the market reaction to the mark to market accounting treatment of equity investments of Greek firms during the period 2002–2004. Using data for firms listed in the Athens Stock Exchange, we find that, on average, firms chose to take valuation gains to the income statement and losses through equity. Subsequently, a treatment effects model of returns on control variables, the valuation adjustment and a dummy for the accounting treatment, which is modeled as conditional to profitability, size, and risk was estimated. Results show that the valuation adjustment contains information for market prices while the market considers the decision to charge the valuation adjustment to equity to be a negative signal.

Suggested Citation

  • Ballas, Apostolos A. & Chalevas, Constantinos & Tzovas, Christos, 2012. "Market reaction to valuation adjustments for financial instruments: Evidence from Greece," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 21(1), pages 52-61.
    • Handle: RePEc:eee:jiaata:v:21:y:2012:i:1:p:52-61
    DOI: 10.1016/j.intaccaudtax.2012.01.004
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    References listed on IDEAS

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    3. Marwa Elnahass & Kamil Omoteso & Aly Salama & Vu Quang Trinh, 2020. "Differential market valuations of board busyness across alternative banking models," Review of Quantitative Finance and Accounting, Springer, vol. 55(1), pages 201-238, July.

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