Stock market valuation of gains and losses on commercial banks' investment securities An empirical analysis

Stock market valuation of gains and losses on commercial banks' investment securities An... Prior studies document an insignificant effect of unrealized gains/losses (URGL) and a negative effect of realized gains/losses (SGL) on bank stock returns. We argue that these results may reflect the omission of changes in value of other net assets resulting from interest rate changes. We find that after controlling for effects of other (on-balance sheet) net assets, both URGL and SGL have significant positive effects on bank returns in normal periods. But the SGL effect is significantly lower in periods of low capital and earnings. These findings are relevant to the market value accounting debate. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Stock market valuation of gains and losses on commercial banks' investment securities An empirical analysis

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Publisher
Elsevier
Copyright
Copyright © 1995 Elsevier Ltd
ISSN
0165-4101
DOI
10.1016/0165-4101(95)00396-Z
Publisher site
See Article on Publisher Site

Abstract

Prior studies document an insignificant effect of unrealized gains/losses (URGL) and a negative effect of realized gains/losses (SGL) on bank stock returns. We argue that these results may reflect the omission of changes in value of other net assets resulting from interest rate changes. We find that after controlling for effects of other (on-balance sheet) net assets, both URGL and SGL have significant positive effects on bank returns in normal periods. But the SGL effect is significantly lower in periods of low capital and earnings. These findings are relevant to the market value accounting debate.

Journal

Journal of Accounting and EconomicsElsevier

Published: Sep 1, 1995

References

  • The effect of interest rate changes on the common stock returns on financial institutions
    Flannery, M.; James, C.

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