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Why Did Politicians Intervene in the Fair Value Debate? The Role of Ideology and Special Interests

Research output: Working paperOther research output

In response to public pressure during the financial crisis, the FASB relaxed fair value accounting rules in April 2009. We investigate the involvement of U.S. Congress members in the fair value debate preceding this regulatory change. Using public opposition to fair value accounting as a proxy for political pressure on the FASB, we find that the likelihood of a politician’s involvement in the accounting debate is positively associated with both the politician’s conservative ideology and financial connections to the financial services industry. We document that conservative politicians pushed for fair value rules relaxation as an alternative to government bailouts during the early phase of the debate, before the Emergency Economic Stabilization Act (EESA) vote in Congress, when they put the issue on the political agenda. Later, however, when the potential design of the new accounting rules became more precise and foreseeable, politicians’ involvement in the debate is more strongly associated with the magnitude of the potential benefits of the new rules for the politically connected financial institutions. While the finding is consistent with politicians catering to financial industry special interests, the results also point to politicians’ ideology playing into the design of accounting rules when these rules are linked to controversial public policies such as bank bailouts.
Original languageEnglish
Number of pages78
StateUnpublished - 2017

    Research areas

  • fair value accounting, financial crisis, politics, interest groups, ideology


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