The effects of SFAS 157 disclosures on investment decisions

Michael Iselin and Allison Nicoletti

Journal of Accounting and Economics, 2017, vol. 63, issue 2, 404-427

Abstract: This paper examines whether public bank managers change both the composition and classification of their investment portfolios after SFAS 157. We first show that non-agency mortgage-backed securities (MBSNA) are the asset class most likely to be measured using level 3 inputs, which are based on unobservable information. We then find that relative to a control sample of private banks, public banks altered their investment portfolios in a manner that reduced the percentage of MBSNA holdings for which SFAS 157 disclosures are required. Taken together, this evidence is consistent with public banks attempting to avoid disclosure of level 3 assets through changes in both asset composition and classification.

Keywords: Economic consequences of accounting standards; SFAS 157; Banks; Fair value accounting (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:63:y:2017:i:2:p:404-427

DOI: 10.1016/j.jacceco.2016.09.004

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