DOI
https://doi.org/10.25772/5587-FP61
Defense Date
2015
Document Type
Dissertation
Degree Name
Doctor of Philosophy
Department
Accounting
First Advisor
Benson Wier, Ph.D.
Second Advisor
Alisa Brink, Ph.D.
Third Advisor
Carolyn Norman, Ph.D.
Fourth Advisor
Eric Gooden, Ph.D.
Fifth Advisor
Sven Kepes, Ph.D.
Abstract
This study examines the effects of the discretion allowed in fair value accounting on manager selling decisions of Level 3 fair value assets and liabilities. Grounded in motivated reasoning and prospect theory, the discretion permitted for Level 3 fair value assets and liabilities is predicted to have behavioral consequences. The study employs a 2 X 2 between- participant design, manipulating a conservative level of the discretion used to ascertain the fair value (more or less conservative) and the volatility of the historically recognized fair value (low or high). Both graduate students and accounting professionals were asked to read a case scenario and make selling decisions regarding a pool of Level 3 fair value assets purchased six quarters ago. The results indicate that the discretion of the conservative level affects the asking price although the volatility of historically recognized fair values does not significantly influence accounting professionals’ selling choices. In a comparative analysis, as volatility increases, the difference in the asking price increases between the graduate student sample and the professional sample. Additionally, this study provides support that discretion of the conservative level does not affect the likelihood to sell the security, but rather affects the asking price and the lowest price willing to accept if participants were to sell the Level 3 fair value security. These findings contribute to the fair value accounting literature by providing new insights on the effects fair value discretion has on manager decision-making as well as contributing evidence to the fair value accounting relevance debate.
Rights
© The Author
Is Part Of
VCU University Archives
Is Part Of
VCU Theses and Dissertations
Date of Submission
4-12-2015