What can we learn about credit risk from debt valuation adjustments?

• 成果类型: Article
• 署名作者: Lin, Wen; Panaretou, Argyro; Pawlina, Grzegorz; Shakespeare, Catherine
• 署名单位: Central University of Finance & Economics; Lancaster University; University of Michigan System; University of Michigan
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-022-09705-0
• 发表日期: 2023
• 页码: 2556-2588
• 关键词: fair value; INFORMATION; liabilities; DISCLOSURES; relevance; default; SPREAD; IMPACT

摘要

Motivated by the debate about the introduction of the fair value option for (financial) liabilities (FVOL) and the requirement to recognize and separately disclose in financial statements debt valuation adjustments (DVAs), this study explores what we can learn about a firm's credit risk from DVAs. Using a sample of US bank holding companies that elect the FVOL, we show that DVAs generally cannot be explained by the same factors that explain contemporaneous changes in bank's credit quality. We further find that DVAs can explain future changes in credit risk when the fair value of liabilities is based on managerial inputs (Level 3). Overall our results suggest that managers have an information advantage in estimating credit risk and that DVAs provide inside information to the market.