Is Historical Cost Accounting a Panacea? Market Stress, Incentive Distortions, and Gains Trading

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Ellul, Andrew; Jotikasthira, Chotibhak; Lundblad, Christian T; Wang, Yihui;
  • Subject: asset-backed securities (ABS); corporate bonds; fire sales; gains trading; historical cost accounting; insurance companies; mark to market; regulation | Regulation; Mark to market; Historical cost accounting; Gains trading; Fire sales; Asset-backed securities (ABS); Corporate bonds; Insurance companies.
    • jel: jel:G12 | jel:G11 | jel:G22 | jel:G14 | jel:G18

This paper explores the trading incentives of financial institutions induced by the interaction between regulatory accounting rules and capital requirements by investigating insurance companies’ trading behavior during the recent financial crisis. According to insurance... View more
  • References (1)

    Manconi, A, M. Massa, and A. Yasuda, 2012, The role of institutional investors in propagating the crisis of 2007- 2008, Journal of Financial Economics 104, 491-518.

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