Publication Type

Journal Article

Version

Preprint

Publication Date

9-2013

Abstract

In October 2008, the International Accounting Standards Board amended IAS 39 to allow banks to retroactively reclassify financial assets that previously were measured at fair value to amortized cost. By reclassifying financial assets, a bank can potentially avoid recognizing the unrealized fair value losses and thereby increase its income and regulatory capital during a market downturn. We examine the implications of the reclassification decision by banks for the properties of financial analyst earnings forecasts during 2008–2009, when economic conditions were highly volatile. We find that the reclassification choice during the financial crisis reduced analyst forecast accuracy and increased forecast dispersion. We also find that the observed decline in analyst forecasting ability is limited to the year of adoption when the economic environment was highly volatile.

Discipline

Accounting | Portfolio and Security Analysis

Research Areas

Financial Performance Analysis

Publication

Journal of Accounting and Public Policy

Volume

32

Issue

5

First Page

342

Last Page

356

ISSN

0278-4254

Identifier

10.1016/j.jaccpubpol.2013.06.006

Publisher

Elsevier

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1016/j.jaccpubpol.2013.06.006

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