'Some fuzzy math' relational information on debt value adjustments by managers and the financial press

摘要

This study provides comprehensive descriptive evidence on the occurrence, size, and reporting by managers and the financial press of debt valueadjustments due to a change in own credit risk (DVAs). The study is motivated by apublic debate about DVAs in which critics describe them as ‘‘counterintuitive’’ andclaim that managers disclose DVA information strategically to make firms ‘‘lookgood’’. Analyzing a sample of 405 firm-quarters of 19 US financial firms that reportDVAs between 2007 and 2014, I found that positive and negative DVAs appearsimilarly often and with similar magnitude. I further found that managers providemore information on large negative DVAs compared to positive DVAs. Managersalso provide more DVA information when they have strategic incentives to do so.Examining newspaper articles on 202 firm-quarters, I found that the financial pressis more likely to cover large positive DVAs and DVAs about which managersprovided more information. Analyzing the articles’ content, I found that the press ismore likely to provide new DVA information if managers’ press releases containlittle information. The findings are in line with popular claims of asymmetric DVAreporting by managers. They are further consistent with the financial press acting asa counterweight to such asymmetric reporting.