Sung Gon Chung and Cheol Lee accepted for publication in Journal of Accounting, Auditing and Finance

Mike Ilitch School of Business Associate Professors of Accounting Sung Gon Chung and Cheol Lee have had a paper accepted for publication in the Journal of Accounting, Auditing and Finance, which publishes papers that significantly contribute to the advancement of knowledge in accounting.

The paper, titled “Valuation Implications of FAS 159 Reported Gains and Losses from Fair Value Accounting for Liabilities,” was co-authored by Gerald Lobo (University of Houston) and Kevin Ow Yong (Singapore Institute of Technology).


This study examines the economic implications of fair value liability gains and losses arising from the adoption of Statement of Financial Accounting Standards No. 159 (hereafter, FAS 159). We find a positive correspondence between a firm’s FAS 159 fair value liability gains and losses and current period stock returns, consistent with the notion that these gains and losses are priced by equity investors. However, further analysis indicates that fair value gains and losses from liabilities have a statistically significant negative association with future returns, suggesting that investors misprice this earnings component and subsequently correct the mispricing. We also find that the negative association for fair value gains is stronger for firms with lower levels of institutional ownership.

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