Do loans fair value affect market value? Evidence from European banks

Abstract

PurposeWith reference to IAS/IFRS, the purpose of this paper is to examine the value relevance of the two amortised cost/fair value measurement methods applied to loans, and test whether loan fair values are an incremental explanatory factor for a bank's stock price, beyond that provided by loan book values.Design/methodology/approachThe value relevance of 83 European banks from 2005‐2008 is analyzed. The authors employ a regression model in which the stock price (dependent variable) is related to accounting variables typically affecting the firms' market value (book value and earnings).FindingsBook values and earnings affect banks' market values. Investors appreciate the difference between loan book and fair values, and attribute to this difference an expected negative value. Furthermore, the control variable for banks headquartered in countries most affected by the financial crisis proves to be strongly significant as the crisis dummy variable itself.Research limitations/implicationsThe results have important implications for bank managers, who should consider the importance that financial markets attribute to loan fair values. There are also implications for regulators and standard setters, though these are less obvious.Originality/valueThis is the first study on the explanatory power of loan fair values in Europe. It addresses loan fair values, and the European market, while previous literature has mainly concerned the US market. In addition, the authors use an original dataset containing information on the loan fair values of European banks during a timeframe which covers both pre‐crisis and crisis periods.

El valor razonable en la contabilidad de los instrumentos financieros. Análisis desde una perspectiva histórica

“…La revisión de los estudios científicos recientes (emitidos desde el año 2005) en torno a la evolución de la contabilidad de instrumentos financieros y del valor razonable en los siglos XX y XXI 6 . 2.…”

“…Concluyen que la volatilidad de los ingresos bajo el modelo de valor razonable (utilizando los desgloses de las cuentas anuales) no afecta de forma significativa la determinación de los precios de cotización, solamente incrementa la percepción de riesgo por parte de los operadores del mercado. Drago et al (2013), utilizan datos de 83 bancos europeos del período 2005 a 2008 y llevan a cabo un análisis de regresión en el que el precio de las acciones (variable dependiente) se relaciona con las variables contables que típicamente afectan al valor de mercado de la empresa (valor en libros y resultados).…”

Relevansi Nilai Selisih Loans Book Value dan Loans Fair Value, Book Value Per Share, Earnings Per Share dan Ukuran Perusahaan

“…Terdapat beberapa penelitian yang menguji value relevance pengungkapan fair value dalam memrediksi nilai saham, diantaranya Khurana dan Kim (2003), Hassan dan Norman (2010), Agostino, et al (2012) dan Drago, et al (2013 Beberapa hasil penelitian yang menjadi dasar rumusan hipotesis pada penelitian ini yaitu, Drago, et al (2013) …”

“…Hal ini berarti bahwa pengungkapan loans fair value mempunyai value relevance dalam menjelaskan harga saham. Hasil ini sesuai dengan penelitian Drago, et al (2013). Menurut Drago, et al (2013) pengaruh yang signifikan ini disebabkan perbankan menerapkan IAS 39 tentang pengakuan dan pengukuran instrumen keuangan termasuk loans.…”

“…

ABSTRAK (Drago, et al 2013). Penggunaan historical cost dipandang akan mengurangi relevansi laporan keuangan dalam pengambilan keputusan

…”