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Thesis defences

PhD Oral Exam - Shane Nicholls, Accountancy

Corporate Governance and Fair Value Accounting: An International Perspective

Thursday, August 13, 2020 (all day)

This event is free


School of Graduate Studies


Daniela Ferrer



When studying for a doctoral degree (PhD), candidates submit a thesis that provides a critical review of the current state of knowledge of the thesis subject as well as the student’s own contributions to the subject. The distinguishing criterion of doctoral graduate research is a significant and original contribution to knowledge.

Once accepted, the candidate presents the thesis orally. This oral exam is open to the public.


The overall objective of this dissertation is to investigate the interface between both firm- and country-level corporate governance mechanisms and fair value accounting for a sample of international financial institutions in the post-financial crisis period. In order to meet this objective, I conduct two studies investigating different aspects of the fair value hierarchy and the role of corporate governance.

The first study investigates the impact of firm- and country-level corporate governance mechanisms on the relevance and reliability of the estimates provided by the fair value hierarchy. This is examined for a sample of publicly listed banks from Canada and the European Union and extends the scant literature on the interface between corporate governance and fair value accounting. The results show that, contrary to prior research, investors do not consider level 3 fair value estimates to be reliable enough to be incorporated into firm value and thus, are not value relevant. Further testing, however, reveals that corporate governance mechanisms act in such a manner as to increase the perceived reliability of level 3 fair value estimates such that investors do consider them to be value relevant. Moreover, the results suggest that, in the context of value relevance decisions, firm- and country-level governance mechanisms act as substitutes for one another.

The second study investigates the potential for the fair value hierarchy to act as an alternative vehicle for earnings management in banks, and the role that firm- and country-level corporate governance plays in impacting the relationship between two competing earnings management methods. Extant earnings management literature on financial institutions focuses on the use of the loan loss provision to manage earnings. However, the recent change in accounting standards towards fair value accounting has provided an alternative vehicle for earnings management, specifically through level 2 and level 3 fair value measurements. The results show that level 2 fair values do not appear to be a viable tool to manage earnings. However, after accounting for the effect of either firm- or country-level corporate governance, the results suggest that level 3 fair values can act as an alternative earnings management tool. Managers faced with high (low) governance report lower (higher) levels of discretionary loan loss provisions as the proportion of level 3 assets increases. Moreover, additional analyses provide preliminary results suggesting that, in the context of earnings management, firm- and country-level governance mechanisms act as complements for one another.

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