Do Fair Value Adjustments Excluded From Net Income Convey New Information That Is Complementary to GAAP Earnings?

John L. Campbell, Samuel O. Davidson and Catherine Shakespeare

Journal of Business Finance & Accounting, 2026, vol. 53, issue 4, 1409-1436

Abstract: We use banks’ quarterly fair value disclosures to perform the first short‐window event study of fair value adjustments excluded from net income and offer three main results. First, we find that fair value adjustments for banks’ loan portfolios are positively associated with short‐window stock returns and that they impact investors’ response to (non‐fair value) GAAP earnings. These results suggest that supplemental fair value disclosures proide “new” information at the time of their disclosure and that they are complementary to GAAP earnings. Second, we find that this complementary relation is larger when the probability that exit prices will be realized is higher and when GAAP earnings are less informative (i.e., the quality of the loan loss provision is poorer). Importantly, these results are concentrated in periods characterized by changing credit risk and interest rates, suggesting macroeconomic conditions are an important determinant of the informativeness of fair value disclosures. Taken together, our results suggest that loan fair value adjustments reflect new information at their disclosure date that investors incorporate into price, these adjustments help investors better interpret GAAP earnings, and these effects concentrate in periods where fair values diverge significantly from book value. Overall, our study suggests that investors benefit when firms report both GAAP earnings and fair value information.

Date: 2026
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