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.
Fair Value Hierarchy, IFRS, Disclosure, OCI
Accounting | Asian Studies | Corporate Finance
Corporate Reporting and Disclosure
GSTF Journal on Business Review
Global Science and Technology Forum
Fair Value Hierarchy Measures: Post-Implementation Evidence on IFRS 7. (2015). GSTF Journal on Business Review. 4, (1), 105-113. Research Collection School Of Accountancy.
Available at: http://ink.library.smu.edu.sg/soa_research/1457
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