We conduct two experiments with experienced accountants to investigate how fair value accounting affects managers' real economic decisions. In Experiment 1, we find that participants are more likely to make sub-optimal decisions (e.g., forgo economically sound hedging opportunities) when...

How do accounting principles become generally accepted? This study develops an analytical framework for the process of general acceptance based on research into social movements. Social movement theory (SMT) has its roots in management and sociology research. We draw on SMT to develop a...

Since the late 1980s, the Financial Accounting Standards Board has implemented several new fair value accounting rules that have resulted in unrealized fair value gains or losses in net income. However, accrual-based earnings management models such as the Modified Jones Model (MJM) of Dechow,...

This paper analytically examines how market efficiency affects the effectiveness of fair value accounting (FVA). Fair value accounting has been one of the most controversial accounting subjects. The recent global financial crisis highlights the disparity between the views of its supporters who...

A growing body of literature investigates the interaction of changes in accounting standards with institutions such as investor protection laws and corporate governance mechanisms. We examine the unintended consequences of fair value accounting in determining mandated preferred dividends. We...

We examine whether US banks' fair value net assets, measured according to the three-level hierarchy introduced in SFAS 157, are associated with information asymmetry during the 2008 financial crisis. Our results show that bid-ask spread, a proxy for information asymmetry, is positively...

Fair value accounting (FVA) has been blamed for amplifying the financial crisis of 2008-2009. We investigate investor and creditor reactions to policymaker deliberations, recommendations and decisions about FVA and impairment rules in the banking industry. If FVA was a key contributor to the...

This paper examines whether and how the level of exposure to fair value accounting moderates the changes in the value relevance of equity book value and net income during a crisis period. Using a sample of European listed financial firms over 2005-2011, our analysis confirms prior literature...