This paper experimentally investigates how fair value measurements of financial instruments affect the decision of nonprofessional investors to invest in a bank’s shares. Specifically, we assess how investors respond to variations in net income resulting from fair value adjustments in trading assets and how the reliability of the fair value estimates affects their decision. We find that investment decreases as a result of transitions from the first to the third level and we even observe lower investments in case of positive changes in income. Investment decreases most if negative valuation adjustments are based on level 1 estimates suggesting that down pricing by the market is considered as a worse signal than model-based decreases in net income. For larger positive and negative adjustments the impact of valuation levels on investment turns out to be limited. Our results do not provide evidence that Fair Value Accounting per se induces pro-cyclical investment behavior.