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Do measurement-related fair value disclosures affect information asymmetry?

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  • Skrålan Vergauwe
  • Ann Gaeremynck

Abstract

Using a sample of European real estate firms over the 2007–2010 period, this study provides some evidence that measurement-related fair value disclosures reduce information asymmetry. We find a negative association between the extent of fair value disclosures and the bid-ask spread, but no association with two additional measures of information asymmetry (zero returns and price impact). Contrary to our expectation, we fail to find evidence that firms using model estimates exclusively benefit the most from such additional disclosure. Analysing measurement errors (the absolute difference between the selling price of an asset and its fair value prior to sale), we find that firms that use model estimates exclusively and provide more measurement-related disclosures have lower errors and more accurate fair value estimates. In other words, if our lack of results is due to investors not using this additional disclosure this is to their detriment.

Suggested Citation

  • Skrålan Vergauwe & Ann Gaeremynck, 2019. "Do measurement-related fair value disclosures affect information asymmetry?," Accounting and Business Research, Taylor & Francis Journals, vol. 49(1), pages 68-94, January.
    • Handle: RePEc:taf:acctbr:v:49:y:2019:i:1:p:68-94
    DOI: 10.1080/00014788.2018.1434608
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    Cited by:

    1. Pinprapa Sangchan & Ahsan Habib & Haiyan Jiang & Md. Borhan Uddin Bhuiyan, 2020. "Fair Value Exposure, Changes in Fair Value and Audit Fees: Evidence from the Australian Real Estate Industry," Australian Accounting Review, CPA Australia, vol. 30(2), pages 123-143, June.
    2. Ann Tarca, 2020. "The IASB and Comparability of International Financial Reporting: Research Evidence and Implications," Australian Accounting Review, CPA Australia, vol. 30(4), pages 231-242, December.
    3. Mohammad Abdullah Fayad Altawalbeh, 2020. "The Impact of Fair Value Accounting on Information Asymmetry: Evidence from Jordanian Banking Sector," International Business Research, Canadian Center of Science and Education, vol. 13(9), pages 1-55, September.

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