Abstract
This study aims at examining the impact of Fair value accounting measured by other comprehensive income on information asymmetry measured by the bid-ask spread in the Jordanian banking sector between 2010 and 2017. The study sample consisted of the thirteen commercial banks listed in Amman Stock Exchange, and panel data analyses were employed to test the study hypothesis, data for the study was gathered through the annual financial reports disclosed on Amman Stock Exchange. The findings revealed that fair value has a negative and significant impact on information asymmetry in the Jordanian commercial banks, indicating that fair value accounting supplies stakeholders with accurate and appropriate data and reflects the informational value of fair value numbers to investors.
Highlights
Historical cost approach is accused of its inability to provide useful information in times of changing prices (Chambers, 1966, as cited by Deegan & Unerman, 2012, p. 176)
Consistent with previous studies (Fontes et al, 2018; Muller et al, 2011; Vergauwe & Gaeremynck, 2019), we find that fair value accounting (FVA) is significantly negative (Coefficient = –0.1011; Prob = 0.0000), which means that fair value numbers are considered of high quality to investors
Following the issuance of IFRS13: Fair Value Measurement, many researchers have examined the impact of FVA on different indicators regarding the usefulness and content of accounting information, including the impact of FVA on information asymmetry
Summary
Historical cost approach is accused of its inability to provide useful information in times of changing prices (Chambers, 1966, as cited by Deegan & Unerman, 2012, p. 176). If it has predictive value and confirmatory value or both, can make a difference to the decisions made by users (IASB, 2010, QC6, 7). Is it relevant to report how much an asset was worth years ago?. The problem of additively: The purchasing power of the dollar decreases as a result of inflation Is it logical to add up assets acquired in different financial periods, given it seems like adding apples to oranges?. Historical cost accounting includes holding gains, which will distort current as well as the previous year’s profit
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