Risk-Relevance of Fair Value Income Measures for Commercial Banks

By Leslie D. Hodder, Patrick E. Hopkins, J. Wahlen. 2006

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Comparing the Value Relevance, Predictive Value, and Persistence of Other Comprehensive Income and Special Items (2011, methodology): “1999), and high versus low volatility companies (Hodder et al. 2006; Yen et al. 2007; Bamber et al. 2010).”
Fair Value Accounting for Liabilities and Own Credit Risk (2008, background): “A large body of research supports the notion that both reported income and its volatility better reflect market and other risks when financial firms recognize financial assets and liabilities at fair value (see, e.g., Barth, Landsman, and Wahlen, 1995; Hodder, Hopkins, and Wahlen, 2006).”
A Content Analysis of the Comprehensive Income Exposure Draft Comment Letters (2007, result): “The claim by banks that the volatility of comprehensive income is misleading because of the piecemeal approach to fair value reporting is contradicted by subsequent research (Hodder, Hopkins, & Wahlen, 2006) that finds that the volatility of full fair-value income is more than three times that of co”
Effect of Derivative Accounting Rules on Corporate Risk-Management Behavior (2009, background): “Since earnings are affected by both real 2 Hodder et al. (2006) and Barth et al. (1995) find that the volatility of annual income after incorporating changes in the fair value of financial instruments is significantly higher than the volatility of annual income measured with historical cost…”