Is Historical Cost Accounting a Panacea? Market Stress, Incentive Distortions, and Gains Trading

• 成果类型: Article
• 署名作者: Ellul, Andrew; Jotikasthira, Chotibhak; Lundblad, Christian T.; Wang, Yihui
• 署名单位: Indiana University System; Indiana University Bloomington; Center for Economic & Policy Research (CEPR); University of London; London Business School; University of North Carolina; University of North Carolina Chapel Hill; Fordham University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12357
• 发表日期: 2015
• 页码: 2489-2538
• 关键词: TO-MARKET; bond; valuation; prices; banks

摘要

Accounting rules, through their interactions with capital regulations, affect financial institutions' trading behavior. The insurance industry provides a laboratory to explore these interactions: life insurers have greater flexibility than property and casualty insurers to hold speculative-grade assets at historical cost, and the degree to which life insurers recognize market values differs across U.S. states. During the financial crisis, insurers facing a lesser degree of market value recognition are less likely to sell downgraded asset-backed securities. To improve their capital positions, these insurers disproportionately resort to gains trading, selectively selling otherwise unrelated bonds with high unrealized gains, transmitting shocks across markets.