Strategic estimation of asset fair values
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Authors
Hanley, KW
Jagolinzer, Alan
Nikolova, S
Publication Date
2018-08Journal Title
Journal of Accounting and Economics
ISSN
0165-4101
Publisher
Elsevier
Volume
66
Issue
1
Pages
25-45
Type
Article
This Version
AM
Metadata
Show full item recordCitation
Hanley, K., Jagolinzer, A., & Nikolova, S. (2018). Strategic estimation of asset fair values. Journal of Accounting and Economics, 66 (1), 25-45. https://doi.org/10.1016/j.jacceco.2018.01.004
Abstract
We examine whether fair value (FV) input levels and estimation sources are related to FV inflation, the difference between an insurer’s FV estimate and the consensus FV estimate across the security’s holders. FV inflation is higher, and self-estimation more likely, when insurers report using Level 3 inputs when the consensus level is 2. Regardless of the level, FV is greater when self-estimated. Public insurers that inflate FV through self-estimation potentially obfuscate detection by reporting the use of Level 2 inputs. Insurers with stronger incentives to appear financially healthy choose to self-estimate, resulting in greater aggregate portfolio FV inflation.
Identifiers
External DOI: https://doi.org/10.1016/j.jacceco.2018.01.004
This record's URL: https://www.repository.cam.ac.uk/handle/1810/274430
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