Defense Date


Document Type


Degree Name

Doctor of Philosophy



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.


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.


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