THE INFORMATIVENESS OF FAIR VALUE TO STOCK PRICE BY PERFORMANCE METRICS (AN EMPIRICAL STUDY ON JORDANIAN LISTED BANKS)
This study is designed to conclude if changes from historical cost model to fair value model have a probable impact on performance results and provide more realistic results for financial reporting. The research issue was addressed using a quantitative technique by examining the impact of fair value measurement for financial instruments on banks stock prices and performance measures. Theoretical frameworks for Ohlson (1995) have been utilized to explore this relationship. The banks included in the sample were 17 Jordanian banks that were listed on the Amman Stock Exchange between 2018 and 2021. Three statistical were applied; simple regression, multiple regression and compare of means. The general findings of the study approved the direct association between fair value alone and value of stock price, also the inclusion of accumulative change in fair value in total assets or owners’ equity improved the relationship between ROA and ROE and stock prices. The inclusion of fair value into other metrics such as P-B, DR, and ATO was approved significant only by simple regression and found insignificant in both multiple regression and compare of means. This study finally comes to the conclusion that fair value accounting is a useful measurement method for Jordanian banks during the whole study period.
Fair value model, relevance, Jordan, financial instruments, IFRS 9, banking sector.