The Effect of Statement of Financial Accounting Standards No. 157 Fair Value Measurements on Analysts' Information Environment

Publication Type

Conference Paper

Publication Date



This study examines whether and how the analysts’ information environment is affected by the adoption of the new standard Statement of Financial Accounting Standards No. 157 Fair Value Measurements (hereafter FAS 157). FAS 157 requires firms to disclose their fair value assets and liabilities into Level 1 measurements (traded in active market), Level 2 measurements (not traded in active markets, but inputs are adjusted for similar items traded in active markets), and Level 3 measurements (inputs are unobservable and generated by the entity) as well as to provide additional information regarding these measurement inputs and valuation techniques. We show that expanded disclosure requirements in compliance with FAS 157 lead to reduced analyst uncertainty and information asymmetry among analysts. These benefits to analysts extend to firms with Level 3 assets in reducing information uncertainty but not information asymmetry. Further analysis reveal that investors react more strongly to analysts’ recommendations issued right after the filing dates in the post-FAS 157 period than before, indicating that these recommendations are more informative. Overall, our findings suggest that additional fair value disclosures as a result of FAS 157 improve the analysts’ information environment.


Accounting | Corporate Finance

Research Areas

Financial Intermediation and Information


Journal of Contemporary Accounting and Economics Symposium, 5 July 2013

City or Country

Perth, Australia

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