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- Publisher Website: 10.1111/j.1475-679X.2007.00231.x
- Scopus: eid_2-s2.0-33947356975
- WOS: WOS:000245066700001
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Article: Market transparency and the accounting regime
Title | Market transparency and the accounting regime |
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Authors | |
Issue Date | 2007 |
Citation | Journal of Accounting Research, 2007, v. 45, n. 2, p. 229-256 How to Cite? |
Abstract | We model the interaction of financial market transparency and different accounting regimes. This paper provides a theoretical rationale for the recently proposed shift in accounting standards from historic cost accounting to marking to market. The paper shows that marking to market can provide investors with an early warning mechanism while historical cost gives management a "veil" under which they can potentially mask a firm's true economic performance. The model provides new explanations for several empirical findings and has some novel implications. We show that greater opacity in financial markets leads to more frequent and more severe crashes in asset prices (under a historic-cost-accounting regime). Moreover, our model indicates that historic cost accounting can make the financial market more rather than less volatile, which runs counter to conventional wisdom. The mechanism shown in the model also sheds light on the cause of many financial scandals in recent years. Copyright ©, University of Chicago on behalf of the Institute of Professional Accounting, 2007. |
Persistent Identifier | http://hdl.handle.net/10722/279306 |
ISSN | 2023 Impact Factor: 4.9 2023 SCImago Journal Rankings: 6.625 |
SSRN | |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Bleck, Alexander | - |
dc.contributor.author | Liu, Xuewen | - |
dc.date.accessioned | 2019-10-28T03:02:16Z | - |
dc.date.available | 2019-10-28T03:02:16Z | - |
dc.date.issued | 2007 | - |
dc.identifier.citation | Journal of Accounting Research, 2007, v. 45, n. 2, p. 229-256 | - |
dc.identifier.issn | 0021-8456 | - |
dc.identifier.uri | http://hdl.handle.net/10722/279306 | - |
dc.description.abstract | We model the interaction of financial market transparency and different accounting regimes. This paper provides a theoretical rationale for the recently proposed shift in accounting standards from historic cost accounting to marking to market. The paper shows that marking to market can provide investors with an early warning mechanism while historical cost gives management a "veil" under which they can potentially mask a firm's true economic performance. The model provides new explanations for several empirical findings and has some novel implications. We show that greater opacity in financial markets leads to more frequent and more severe crashes in asset prices (under a historic-cost-accounting regime). Moreover, our model indicates that historic cost accounting can make the financial market more rather than less volatile, which runs counter to conventional wisdom. The mechanism shown in the model also sheds light on the cause of many financial scandals in recent years. Copyright ©, University of Chicago on behalf of the Institute of Professional Accounting, 2007. | - |
dc.language | eng | - |
dc.relation.ispartof | Journal of Accounting Research | - |
dc.title | Market transparency and the accounting regime | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1111/j.1475-679X.2007.00231.x | - |
dc.identifier.scopus | eid_2-s2.0-33947356975 | - |
dc.identifier.volume | 45 | - |
dc.identifier.issue | 2 | - |
dc.identifier.spage | 229 | - |
dc.identifier.epage | 256 | - |
dc.identifier.eissn | 1475-679X | - |
dc.identifier.isi | WOS:000245066700001 | - |
dc.identifier.ssrn | 1065864 | - |
dc.identifier.issnl | 0021-8456 | - |