Fair value-related information in analysts’ decision processes: Evidence from the financial crisis

Jannis Bischof, Holger Daske, Christoph Sextroh

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We use a sample of conference calls and analyst research reports from international banks to examine how financial analysts request and communicate fair value-related information in their valuation process. We find that analysts devote considerable attention to fair value-related topics. Most of the conference call questions and references in research reports pertain to fair value reclassifications and fair value changes of liabilities resulting from banks’ own credit risk. The accounting impact of these one-time effects during the financial crisis and a lack of corresponding firm disclosures help to explain the prevalence of these two topics. The content of the questions and references suggests that analysts have different motives for their interest in fair value-related information. While some analysts adjust reported earnings for unrecognised fair value changes of reclassified assets, most of the observed analysts exclude banks’ own credit risk effects from reported earnings. Thus, the use of fair value-related information varies substantially across analysts and across instruments.
LanguageEnglish
Pages363-400
JournalJournal of Business Finance & Accounting
Volume41
Issue number3-4
DOIs
StatePublished - 10 Apr 2014
Externally publishedYes

Fingerprint

Decision process
Financial crisis
Analysts
Fair value
Conference calls
Value change
Credit risk
Bank credit
Liability
Disclosure
Assets
Financial analysts

Keywords

  • fair value accounting
  • fair value reclassifications
  • own credit risk
  • bank disclosure
  • financial analysts
  • conference calls
  • analyst reports

Cite this

@article{fece2587a7e0440daf82e45f72774157,
title = "Fair value-related information in analysts’ decision processes: Evidence from the financial crisis",
abstract = "We use a sample of conference calls and analyst research reports from international banks to examine how financial analysts request and communicate fair value-related information in their valuation process. We find that analysts devote considerable attention to fair value-related topics. Most of the conference call questions and references in research reports pertain to fair value reclassifications and fair value changes of liabilities resulting from banks’ own credit risk. The accounting impact of these one-time effects during the financial crisis and a lack of corresponding firm disclosures help to explain the prevalence of these two topics. The content of the questions and references suggests that analysts have different motives for their interest in fair value-related information. While some analysts adjust reported earnings for unrecognised fair value changes of reclassified assets, most of the observed analysts exclude banks’ own credit risk effects from reported earnings. Thus, the use of fair value-related information varies substantially across analysts and across instruments.",
keywords = "fair value accounting, fair value reclassifications, own credit risk , bank disclosure, financial analysts, conference calls, analyst reports",
author = "Jannis Bischof and Holger Daske and Christoph Sextroh",
year = "2014",
month = "4",
day = "10",
doi = "10.1111/jbfa.12063",
language = "English",
volume = "41",
pages = "363--400",
journal = "Journal of Business Finance & Accounting",
issn = "0306-686X",
publisher = "Wiley-Blackwell",
number = "3-4",

}

Fair value-related information in analysts’ decision processes : Evidence from the financial crisis. / Bischof, Jannis; Daske, Holger; Sextroh, Christoph.

In: Journal of Business Finance & Accounting, Vol. 41, No. 3-4, 10.04.2014, p. 363-400.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Fair value-related information in analysts’ decision processes

T2 - Journal of Business Finance & Accounting

AU - Bischof,Jannis

AU - Daske,Holger

AU - Sextroh,Christoph

PY - 2014/4/10

Y1 - 2014/4/10

N2 - We use a sample of conference calls and analyst research reports from international banks to examine how financial analysts request and communicate fair value-related information in their valuation process. We find that analysts devote considerable attention to fair value-related topics. Most of the conference call questions and references in research reports pertain to fair value reclassifications and fair value changes of liabilities resulting from banks’ own credit risk. The accounting impact of these one-time effects during the financial crisis and a lack of corresponding firm disclosures help to explain the prevalence of these two topics. The content of the questions and references suggests that analysts have different motives for their interest in fair value-related information. While some analysts adjust reported earnings for unrecognised fair value changes of reclassified assets, most of the observed analysts exclude banks’ own credit risk effects from reported earnings. Thus, the use of fair value-related information varies substantially across analysts and across instruments.

AB - We use a sample of conference calls and analyst research reports from international banks to examine how financial analysts request and communicate fair value-related information in their valuation process. We find that analysts devote considerable attention to fair value-related topics. Most of the conference call questions and references in research reports pertain to fair value reclassifications and fair value changes of liabilities resulting from banks’ own credit risk. The accounting impact of these one-time effects during the financial crisis and a lack of corresponding firm disclosures help to explain the prevalence of these two topics. The content of the questions and references suggests that analysts have different motives for their interest in fair value-related information. While some analysts adjust reported earnings for unrecognised fair value changes of reclassified assets, most of the observed analysts exclude banks’ own credit risk effects from reported earnings. Thus, the use of fair value-related information varies substantially across analysts and across instruments.

KW - fair value accounting

KW - fair value reclassifications

KW - own credit risk

KW - bank disclosure

KW - financial analysts

KW - conference calls

KW - analyst reports

U2 - 10.1111/jbfa.12063

DO - 10.1111/jbfa.12063

M3 - Article

VL - 41

SP - 363

EP - 400

JO - Journal of Business Finance & Accounting

JF - Journal of Business Finance & Accounting

SN - 0306-686X

IS - 3-4

ER -