The impact of the institutional environment on the value relevance of fair values

Fiechter, Peter; Novotny-Farkas, Zoltán

doi:10.1007/s11142-016-9378-7

Cited by 47 publications

(32 citation statements)

References 45 publications

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“…Reis and Stocken (2007), for example, obtain evidence that the informativeness of the accounting report is superior when using the fair value in comparison with the use of historical cost, since the first completely reveals the company's inventory level. Fiechter and Farkas (2017), on the other hand, demonstrate that it is the institutional differences between countries that affect the ability of investors to process and understand fair value information in their valuations, thus refuting the idea that valuation discounts in certain fair value assets arose from measurement errors or bias. For Sapra (2010) the benefit of using fair value would be the ability to better inform external users about the risks underlying the business, thus improving the assessment of investment decisions.…”

Section: Hierarchical Levelmentioning

confidence: 99%

Fair value measurement and its impact on audit fees: evidence in the Brazilian market

2021

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Objective: The purpose is to verify the impact of using the measurement at fair value on the audit fees, differentiating even the period before and after the adoption of IFRS 13 (CPC 46). Methodology: The research is quantitative, for testing the hypothesis raised, the multiple regression technique was used, with data available from companies listed in B3 for the period between 2010 and 2016. Results: The evidence indicates that the complexity and subjectivity of fair value is recognized by the audit firms, that is, audit firms recognize that fair value measurement implies more effort and that the associated audit risk rises, leading firms to charge of a risk premium for the provision of the service. However, it was not possible to confirm that auditors' fees increased after the adoption of IFRS13 (CPC 46). Contributions of study: Theoretical/methodological - The study contributes to understanding the impacts of adopting international accounting standards, in this specific case on audit fees. Social/management - Given the evidence that there is a higher audit cost associated with the greater complexity of information in a fair value environment, companies can develop mechanisms to minimize the uncertainty of the information to be audited.

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Section: Hierarchical Levelmentioning

confidence: 99%

Fair value measurement and its impact on audit fees: evidence in the Brazilian market

2021

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“…To address investors' information assessment, we focus on institutional differences within the EU and investigate their influence on the value relevance of Level 3 fair values. In order to do so, we cluster countries in market-based and bank-based economies (Ali and Hwang, 2000, Beck and Levine, 2002, and Fiechter and Novotny-Farkas, 2014).…”

Section: Development Of Hypothesesmentioning

confidence: 99%

“…Second, Skinner (1996) critically hints that several fair values disclosures can limit the ability of market participants to properly process fair value information in their valuation. Fiechter and Novotny-Farkas (2014) investigate extent factors in determining the value relevance of recognized fair values of different fair value categories and find evidence for that objection, specifically, that investors' ability to properly process fair value information depends on the country-specific level of market sophistication and information environment. We provide a holistic evidence for Skinner's objection and apply it to the fair value hierarchy, distinguishing between market-based and bankbased economies, based on their comparative size and activity of the stock market relative to banks (Beck andLevine, 2002, Fiechter andNovotny-Farkas, 2014).…”

Section: Introductionmentioning

confidence: 99%

Are Level 3 Fair Values Reflected in Firm Value? Evidence from European Banks

Kisseleva¹,

Lorenz²

2016

SSRN Journal

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“…In the practice of financial analysis, there are several methods for determining the discount rate, for example, the CAPM model, cumulative approach, etc (Espinoza, 2014;Fiechter & Novotny-Farkas, 2017).…”

Section: Introductionmentioning

confidence: 99%