Fair Value Accounting and the Cost of Equity Capital: The Moderating Effect of Risk Disclosure

Evidence thus far suggests fair value accounting poses risk and affects firms’ returns in some ways. This research, on a sample of Asian banks, improves the understanding of the information risk effect of fair value accounting by examining the moderating role of risk disclosure in the relationship b...

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Bibliographic Details
Published in:SHS Web of Conferences 2017, Vol.34, p.7005
Main Authors: Dignah, Ashwag, Abdul Latiff, Radziah, Abdul Karim, Zulkefly, Abdul Rahman, Aisyah
Format: Article
Language:English
Subjects:
Accounting
Disclosure
Economic models
Equity capital
Fair value
Risk exposure
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Summary:Evidence thus far suggests fair value accounting poses risk and affects firms’ returns in some ways. This research, on a sample of Asian banks, improves the understanding of the information risk effect of fair value accounting by examining the moderating role of risk disclosure in the relationship between fair value accounting and the cost of equity capital. The results from a generalised method of moments on dynamic panel data analysis, show that risk disclosure mitigates the asymmetric information problem. Thus the findings contribute towards the standard setters’ effort in improving the practice of fair value accounting, and suggest that there are benefits in mandating disclosure especially for banks.
ISSN:2261-2424
2416-5182
2261-2424
DOI:10.1051/shsconf/20173407005