Fair value accounting and financial stability – Based on the adoption of K-IFRS in 2011

Chae Chang Im, Ahrum CHOI*, Sungtaek Yim

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    1 Citation (Scopus)


    Fair value accounting refers to the accounting method which an asset or liability is estimated based on the current market price, so called fair value. Under the fair value accounting, it is more difficult for managers to hide bad information, because the value of an asset or liabilities is re-estimated periodically to reflect the changes in fair value in the market. In this case, firms’ financial stability will be increased. On the other hand, fair value accounting can intensity the volatility of the numbers in the financial statement, which leads to decreases the financial stability. This papers empirically examines the effect of the fair value accounting on the financial stability based on the IFRS adoption in Korea. Using the non-financial firms listed in KOSPI and KOSDAQ from 2000 to 2013, we find that the expansion of fair value accounting increases financial stability. The results support the argument that fair value accounting prohibits managers from hiding bad information, rather it enforces the disclosure of value-relevant information to the investors. The results are consistent with a battery of robustness checks. Thus, the overall results show that the expansion of fair value accounting increase financial stability.

    Original languageEnglish
    Pages (from-to)1825-1842
    Number of pages18
    JournalJournal of Applied Business Research
    Issue number6
    Publication statusPublished - 2016

    Scopus Subject Areas

    • Business and International Management

    User-Defined Keywords

    • Crash risk
    • Fair value accounting
    • Financial stability
    • Negative skewness
    • Stock return volatility


    Dive into the research topics of 'Fair value accounting and financial stability – Based on the adoption of K-IFRS in 2011'. Together they form a unique fingerprint.

    Cite this