Options
The Impact of Fair Value Option on Information Asymmetry-Using Bid-Ask Spread, Share Turnvoer and Return Volatility
Date Issued
2008
Date
2008
Author(s)
Abstract
In February 2007, the Financial Accounting Standards Boards (FASB) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The statement permits entities to employ a fair value option, which measures eligible items at fair value at specified election dates. According to the objectives of the statement, a decline in information asymmetry is expected after the implication of the SFAS No. 159. he study investigates the effect of fair value option on banks’ information asymmetry. I collect the data of bank holding companies spanning the time period from 2006 to 2007. Using bid-ask spreads, share turnover and return volatility as proxies for information asymmetry, I find mixed evidence about the impact of information asymmetry on bank holding companies. There are several possible explanations. First, the US banking industry was severely impacted by the subprime crisis since 2007. Second, managers have incentives to place the re-measurement cumulative-effect adjustment in retained earnings to achieve earnings management. Finally, the sample period is too short to observe the effect of fair value option on bank holding companies’ information asymmetry.
Subjects
Fair Value Option
Information Asymmetry
Bank Holding Company
Bid-Ask Spread
Turnover
Return Volatility
File(s)
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Name
ntu-97-R95722020-1.pdf
Size
23.32 KB
Format
Adobe PDF
Checksum
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