Publication Type

Journal Article

Version

publishedVersion

Publication Date

7-2015

Abstract

Using a balance sheet valuation model, this study examines if information on the fair value hierarchy of on-balance sheet financial assets and financial liabilities are incorporated in the market’s valuation of companies’ equities in Singapore. The results of the study show significant associations between as-reported Level 1 and Level 2 fair value measures of financial assets and market values. However, the results are not significant for Level 3 fair value measures of financial assets and each of the three levels of fair value measures of financial liabilities. The results also show that returns are more positively associated with as-reported gains and losses from Level 1 and Level 2 fair value measures than those from Level 3 fair value measures. Overall, the evidence suggests that information on the fair value hierarchy of IFRS 7 Financial Instruments: Disclosures are used by market participants in their pricing decisions. The market however appears to place greater weights on fair value changes taken to the income statement than those taken to OCI, notwithstanding the level of the fair value measure. While the fixation with income statement measures remains a puzzle, the results are consistent with prior studies that show that investors largely ignore OCI in their pricing of shares.

Keywords

Fair Value Hierarchy, IFRS, Disclosure, OCI

Discipline

Accounting | Asian Studies | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

GSTF Journal on Business Review

Volume

4

Issue

1

First Page

105

Last Page

113

ISSN

2010-4804

Identifier

10.7603/s40706-015-0013-6

Publisher

Global Science and Technology Forum

Copyright Owner and License

Author

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Additional URL

https://doi.org/10.7603/s40706-015-0013-6

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