Investor perception of fair value evaluation: focusing on financial instruments

Investment Management & Financial Innovations

Minjung Kang¹  Young-Tae Yoo¹ 

[1] Assistant Professor, Incheon National University, Incheon;

关键词: abnormal return;    accrual anomaly;    capital market;    fair value accounting;    predictability;   

DOI  :  10.21511/imfi.16(1).2019.16

来源: DOAJ

【 摘 要 】

This study analyzed capital market investors’ recognition of the predictability of fair value-based valuation. It was examined if market investors overvalue the predictive value of fair value by comparing that value with that measured in accounting performance. The results reveal that investors are likely to overvalue fair value more than predictive values reflected in accounting performance. In particular, the results show that investors can gain abnormal returns through the market anomaly due to the functional fixation that investors cannot distinguish between unrealized profits and realized ones. Though there are considerable studies about accrual anomaly, few studies explore it with the separation of unrealized profits from total accruals. A number of studies about the causes of accrual anomaly have been conducted from various perspectives. The analysis of this study argues that the unrealized profits derived from fair value evaluation can be a cause of accrual anomaly. On the basis of the result, this study suggests that information about unrealized earnings should be reported separately.

【 授权许可】

Unknown