TY  - JOUR
AU  - Laux,Christian
AU  - Leuz,Christian
TI  - Did Fair-Value Accounting Contribute to the Financial Crisis?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15515
PY  - 2009
Y2  - November 2009
UR  - http://www.nber.org/papers/w15515
L1  - http://www.nber.org/papers/w15515.pdf
N1  - Author contact info:
Christian Laux
Vienna University of Economics and Business 
E-Mail: Christian.Laux@wu.ac.at

Christian Leuz
Booth School of Business
University of Chicago
5807 S. Woodlawn Avenue
Chicago, IL 60637-1610
Tel: 773/834-1996
Fax: 773-834-4585
E-Mail: cleuz@chicagobooth.edu
AB  - The recent financial crisis has led to a major debate about fair-value accounting.  Many critics have argued that fair-value accounting, often also called mark-to-market accounting, has significantly contributed to the financial crisis or, at least, exacerbated its severity.  In this paper, we assess these arguments and examine the role of fair-value accounting in the financial crisis using descriptive data and empirical evidence.  Based on our analysis, it is unlikely that fair-value accounting added to the severity of the current financial crisis in a major way.  While there may have been downward spirals or asset-fire sales in certain markets, we find little evidence that these effects are the result of fair-value accounting.  We also find little support for claims that fair-value accounting leads to excessive write-downs of banks’ assets.  If anything, empirical evidence to date points in the opposite direction, that is, towards overvaluation of bank assets.
ER  -