Relevance of Fair Value Disclosures in Spanish Credit Institutions

Abstract

Spanish quoted credit institutions have applied IFRS for their consolidated financial statements since 2005. IFRS implied the implementation of the fair value measurement model for a greater number of financial instruments than previously, as well as the disclosure of the difference between fair value and book value for those financial instruments not measured at fair value on the balance sheet. In line with the value relevance literature, and through the application of an Ohlson model, we have analyzed whether fair value disclosures contribute to explaining the difference between the equity book value and the equity market value of the sample entities. We have modeled several variables related to the possible goodwill of the entities in order to increase the model’s explanatory power. Our paper is the first to focus exclusively on Spanish quoted credit institutions as well as to use an ample timeframe which includes pre-crisis, crisis and post-crisis periods (2004 to 2019). The results show that, generally speaking (and in contrast to previous studies focused on other regions), fair value disclosures within the sample entities are not relevant for investors. There are several possible explanations for these results which are related to the specific characteristics of Spanish credit institutions and to the time period utilized for the sample. Conversely, entity size was found to have a statistically significant impact on the value-relevance of the goodwill explanatory factors. Las entidades de crédito cotizadas españolas han venido aplicado las NIIF desde el ejercicio 2005. La implementación de las NIIF conllevó la aplicación del modelo de valor razonable para más instrumentos financieros y, además, el desglose de la diferencia entre el valor razonable y el valor en libros de los instrumentos financieros no valorados a valor razonable en el balance. Siguiendo la literatura denominada value relevance y aplicando un modelo de Ohlson, hemos analizado si los desgloses de valor razonable contribuyen a explicar la diferencia entre el valor contable y el cotizado del patrimonio neto de las entidades de la muestra. Hemos modelizado varias variables con relación al posible fondo de comercio de las entidades, con el objetivo de mejorar el poder de explicación del modelo. Nuestro trabajo es el primero que se enfoca exclusivamente en entidades de crédito cotizadas españolas y en un amplio período de tiempo que incluye épocas pre-crisis, épocas de crisis y post-crisis (2004 a 2019). Los resultados muestran que, en general (y, a diferencia de las conclusiones de otros estudios previos para otras muestras) los desgloses de valor razonable no son relevantes para los inversores. Hay varias posibles explicaciones para este resultado, relacionadas con las características de las entidades de crédito españolas y los años a los que se refiere la muestra. Por otro lado, el tamaño de la entidad tiene un impacto estadístico significativo en la relevancia de los factores explicativos del fondo de comercio.

The Quality of Fair Revaluation of Fixed Assets and Additional Calculations Aimed at Facilitating Prospective Investors’ Decisions

“…However, ref. [19] found in their earlier work on Spanish companies that asset revaluations were uncorrelated with the knowledge that was meaningful to investors [19].…”

“…. 19) is the intercept of the firm, t (t = 2013-2018) is the year studied, and they are coefficients for each regression variable, including the term error. Static panel models were evaluated using a variety of methods, including pooled ordinary minimum squares (PLS), random effects (RE), and fixed effects (FE), including N-firm specific intercepts.…”