Banks’ Information Acquisition and Value-relevance of Fair Value Hierarchy

초록

[Purpose] This study examines whether the decline in value－relevance of opaque componentswithin the fair value hierarchy under SFAS 157 Fair Value Measurements is mitigated by banks’information acquisition activities. In particular, we use EDGAR downloads as a proxy forinformation acquisition and investigate their role. [Methodology] We conduct an empirical analysis using U.S. bank data combined withEDGAR log file data from the fourth quarter of 2009 to the third quarter of 2014. Wemeasure the composition of the fair value hierarchy and the level of information acquisitionthrough EDGAR, and analyze their effects on the value－relevance of fair value disclosures. [Findings] The results show that, first, banks with a higher proportion of opaque componentsin the fair value hierarchy acquire more equity－related information. Second, the decrease invalue－relevance of these opaque components documented in prior studies is significantlyattenuated when banks acquire more up－to－date equity information relative to their peers. [Implications] This study suggests that banks’ information acquisition via EDGAR enhancesthe reliability of fair value disclosures and reduces the discounting of opaque components bymarket participants, thereby improving value－relevance. The findings imply that the usefulnessof fair value information depends not only on measurement standards but also on the surroundinginformation environment.

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