The Effect of Fair Value of Financial Assets on Informations Content of Future

Earnings after Mandatory Adoption of PSAK 50&55 (Revised 2006):

Evidence from Public Banks in Indonesia
IRA GERALDINA
Indonesia Banking School

Abstract
This study aims to examine the effect of the fair value of financial assets in
increasing informations content of banks future earnings after mandatory
adoption of PSAK 50&55 (Revised 2006), Financial Instruments: recognition,
measurement, and presentation in banking industry in Indonesia. Financial assets
(FVFA) used in this study are classified into fair value through profit or loss
(FVTPL), available for sale (AFS), held to maturity (HTM), and loans and
receivables (LNR). This study uses 138 bank year samples that are listed in
Indonesia Stock Exchange for 2006-2012 periods. Using common panel data
analysis, the results show that informations content of banks future earnings is
increase after mandatory adoption of PSAK 50&55 (Revised 2006), but the use of
the fair value of financial assets reduce the increasing of informations content of
banks future earnings. This result suggests that banks current earnings ability to
predict future earnings is increase after mandatory adoption of PSAK 50&55
(Revised 2006). But the use of the fair value of financial assets reduces banks
current earnings ability to predict future earnings. The financial asset that is
classified as available for sale (AFS) may contribute to this reduction of
informations content of firms future earnings after the mandatory adoption of
financial instrument standards in Indonesia.
Keywords: Fair value of financial assets, international accounting standards on
financial instrument, fair value through profit or loss, available for
sale, hold to maturities, loans and receivables, FERC.
Abstrak
Penelitian ini bertujuan untuk menguji pengaruh penerapan nilai wajar aset
keuangan terhadap kemampuan investor dalam menilai kandungan informasi laba
masa depan sesudah adopsi wajib PSAK 50& 55 (Revisi 2006). Studi ini
menggunakan 138 bank yang terdaftar di BEI periode tahun 2007-2011 sebagai
sampel. Aset keuangan (FVFA) yang digunakan pada penelitian ini adalah efekefek yang dimiliki bank yang dikategorikan menjadi fair value through profit or
loss (FVTPL), available for sale (AFS), dan hold to maturities (HTM), serta loans
and consumer receivables (LNR). Data dianalisis dengan analisis data panel
pendekatan commom. Secara umum, hasil penelitian menunjukkan bahwa terjadi
peningkatan kandungan laba masa depan setelah adopsi wajib PSAK 50 & 55,
namun penggunaan nilai wajar aset keuangan menurunkan peningkatan
kandungan laba masa depan setelah adopsi wajib PSAK 50 & 55. Komponen
tersebar yang mungkin menyebabkan penurunan kandungan laba masa depan
setelah adopsi wajib PSAK 50 & 55 adalah aset keuangan yang tergolong
available for sale (AFS).
Kata Kunci:

Nilai Wajar Aset Keuangan, PSAK 50&55, fair value through

profit or loss, available for sale, hold to maturities, loans and
consumer receivables, FERC.

Introduction
Many studies had examined the value relevance of fair accounting information

in previous researches. Previous studies conducted mostly in non-financial industries

and did not examine the value relevance of fair value of financial assets (Teets and
Wasley, 1996; Ettredge, et al., 2005; Lennox & Park, 2006; Louis, 2003; Kallapur&
Kwan, 2004). Previous results show that the accounting information is relevant to
investors in the capital market and some of them are able to increase the ability of the
market to anticipate of future earnings.
Studies on the relevance of accounting information for investors in financial
institutions (banking industry) are relatively few. Nelson (1996) examined the relevance
of fair value accounting under PSAK No.107 in commercial banks, while
Venkatachalam (1996) examined the value relevance of disclosure of derivative
instruments in banking industry. Ahmed, Kilic, and Lobo (2006) examined the
difference of value relevance between recognition and disclosure of derivative
instruments in banking industry. Dimitropoulos, Asteriou, &Koumanakos (2010)
examined the information content of earnings and cash flows of banks in Greece. Duh,
et al., (2012) examined the impact of IAS 39 implementations on the value relevance of
earnings volatility risk. Papadamou&Tzivinikos (2013) examined the impact of IFRS on
the content of some risk measures and accounting ratios in banking industry in Greece.
In general, the results of the above studies show that several accounting performance
information such as earnings and cash flow are relevant to investors in the capital
market and fair value of financial instruments increase the value relevance of risk and
banks performance after the IFRS adoptions period.

This study aimstoexamine the effect ofthe fairvalue offinancial assets

inincreasing informations content of firms future earningsafter mandatoryadoption of
PSAK 50&55(Revised 2006) in listed banks in Indonesia. PSAK 50 & 55 (Revised
2006) is Statements of Financial Accounting Standard (SFAS) in Indonesia which
regulates the measurement, recognition, and presentation of financial instruments. The
SFAS had convergence to IAS 32 and 39. The use of fair value of financial instruments
is expected able to increase the value relevance of accounting information for investors
compared to historical values (cost). However, the use of fair value, particularly on
financial instruments raising a lot of criticism related to the high complexity of the
implementation and the impact that may increase earnings volatility (Duh, et al., 2012).

Therefore, it is interesting to study the impact of mandatory adoption of PSAK 50 & 55

(Revised 2006) which has been convergent into international accounting standards on
markets ability to anticipate firms future earnings. If the use of fair value of financial
assets is more relevant to investors after the adoptions period, investors will use fair
value of financial assets to assess the future of banks performance (earnings) that
reflected in current earnings.
This studycontinued study of Nelson(1996) which examined thevalue relevance
offair valueof financialinstrumentsfor investors using SFASNo.107. His study did not
examine the effect of fair valueof financialinstrumentson markets ability to anticipate
firms future earnings after mandatory adoption. The contributions ofthis study are,
firstly, examines the effect ofthe fairvalue offinancial assets inincreasing informations
content of banks future earningsafter mandatoryadoption of PSAK50&55(Revised
2006). Secondly, analyzes four classifications of financial assets in explainingthe effect
of fair value on informations content of firms future earningsafterthe mandatory
adoptions

period.

The

group

of

financial

assetsin

this

study

is

fair

valuethroughprofitorloss(FVTPL), available for sale(AFS), held tomaturities(HTM), as

well asloansandreceivables(LNR).

This paper is organized as follows: literature review and hypothesis development

will be delivered in the second sub-heading, researchs design (researchs methodology)
will be delivered in the third sub-heading, data analysis and results of the study will be
presented in the fourth sub-heading, while the conclusions, limitations, and suggestions
for future research will be presented in the fifth sub-heading.

LiteratureReviews andHypothesisDevelopment
The general objective of international financial reporting standards (IFRS) is

providing useful information for users (the existing and potential investors) by
providing relevant information to help investors making investments decision. If the
information that available in the market is the relevant to investors, it will drive
investors to create trading transactions in the market. One of the relevant information
that will be used by investor is earnings and according to Landsman, et al.,(2012), the
value relevance of earnings increases after the adoption of IFRS.
Several studies show the increasing in value relevance of earnings after IFRS
adoptions period (Landsman, et al., 2012; Papadamou&Tzivinikos, 2013; Duh, et al.,

2012), due to IFRS encourages the practice of relevance and transparency in financial
reporting by providing adequate disclosures. Relevant information will be used by
market to assess future company's risks and performance, thereby increasing the content
of the company's future earnings (Ettredge, et al., 2005). Based on above arguments, the
first hypothesis statement (H1) is as follows:
H1:

the informations content of firms future earnings will increase after mandatory
adoption of PSAK 50 & 55 (Revised 2006) which had been convergent into
international accounting standards.

PSAK 50 & 55 (Revised 2006) classify financial assets into four categories,
namely fair value through profit or loss (FVTPL), held-to-maturity investments (HTM),
loans and receivables (LNR), and available-for-sale (AFS). The four categories of
financial assets are measured at fair value in the general meaning.
At the initial recognition, the financial instrument is measured at fair value plus
transaction costs except for financial instruments that are measured at fair value.
Recognition at post-acquisition, financial assets that are categorized as FVTPL and AFS
are measured at fair value, while the HTM and LNR are measured at amortized cost by
using effective interest rate. Any changes in the fair value of FVTPL category will be
recognized in profit or loss, while the AFS category is recognized in equity.
Amortization of interest using the effective interest method for HTM and LNR category
will be recognized in profit or loss. Similarly, if there is a declining in fair value of the
four categories of financial assets will be recognized in profit or loss.
The use offair valueinfinancial assetsset outin more detail, especiallyregarding
thefair valuequotationsthat usedto help investors in capital market when assessingthe
riskexposure andperformance ofthe financialassetsowned bybanks. However, the
differences of measurementandrecognitionoffourtypesof financialassetshave different
impactonprofit and loss, so itis difficult to determinewhichone of financialassetsthat
have ability to increase thevalue relevance of earnings information for investors.
Previous research has shown that the use of fair value of financial assets
increasing the volatility of bank earnings (Duh, et al., 2012). Earnings volatility may
reflect the risk exposure that is faced by banks due to of financial assets that owned by
banks, therefor it is easier for investors to assess risks exposure of the financial assets.
However, Duh, et al.,(2012) failed in providing empirical evidence regarding the use of
fair value in financial assets that is positively related to value relevance of bank

earnings risk. Similarly, Nelson (1996) failed to provide empirical evidence of the
ability of fair value in increasing the value relevance of accounting information after
adoption of PSAK No.107.
Therefore, although theuse offair valueinfinancial assetsis intendedtoincrease
thevalue relevanceof accountinginformation(earnings), it is difficult to determine the
differences or the similarities of the impact ofthe use offair value of each types of
financial assetsonbanks informationcontent of future earnings. Thus, itis difficult to
determinewhether the use offair valueinfinancialassetsmayincreaseordecrease theability
ofthe markettoassessfuture riskandbankperformance(FERC) after mandatory adoption
of PSAK50&55(Revised 2006) in current earnings whichin turn willdrive the
marketinvestment decisions making process. Based ontheabovearguments, it is stated
secondhypothesis(H2) as follows:
H2: After the adoption of PSAK 50 & 55 (Revised 2006), the use of fair value in
financial assets will increase (decrease) the informations content of firms future
earnings.

3. Research Design
3.1 Samples
This study uses publicly listed commercial banks in Indonesia Stock Exchange
period 2007-2011 as samples. The banking industry is chosen due to large portion of
their assets are financial assets. The final samples are 138 observations (firm years) is
presented in Table 3.1 (see appendix).
Data analysis use unbalanced common data panel. Financial statements of
commercial banks in 2006-2012 periods were obtained from the Center for Business
and Economic Database of Economic Faculty of Universitas Indonesia. The financial
statements from 2006 were used to obtain earnings and number of shares outstanding
data prior to the current period (t-1), while the financial statements in 2012 were used to
obtain earnings data for the next after current year (t +1). Monthly stock price data were
obtained from Bloomberg database.

3.2 Research Model

Equations 3.1 and 3.2 below are used to test the hypothesis 1 and 2. Model 1
(equation 3.1) is the basic model that combines four types of classification of financial
assets (fair value of financial assets/FVFA), while model 2 (equation 3.2) decomposes
financial assets into four classifications: fair value through profit or loss (FVTPL),
available for sale (AFS), held to maturities (HTM), as well as loans and receivables
(LNR). Both models are used in order to investigate the effectof the fair value of
financial assets on the informations content of firms future earnings (FERC) after
mandatory adoption of PSAK 50 & 55 (Revised 2006) and, specifically, the effects of
each classification of its financial assets on future earnings response coefficient (FERC)
the standards adaption.
, = 0 + 1 ,1 + 2 , + 3 ,+1 + 4 , + 5 ,+1 , +
6 , + 7 ,+1 , + 8 ,+1 , , + ,
(3.1)
, = 0 + 1 ,1 + 2 , + 3 ,+1 + 4 , + 5 , + 6 , +

7,+8,+9,+1,+
10,+1,+11,+1,+12,+1,+13,+
1,+14,+1,+15,+1,,+16,+1
,,+17,+1,,+18,+1,
(3.2)
, +,

Explanation:
,

: The annual stock return for year t, measured over the 12-month period
ending three months after the firms fiscal year-end.

: Income before extraordinary items for the year t; deflated by market

value of the equity three months after the year t-1 fiscal year-end.

,+1

: Income before extraordinary items for the year following year t; deflated
by market value of the equity three months after the year t-1 fiscal yearend.

: Percentage of fair value of financial assets (FVFA) to total assets of bank

i period t; FVFA is sum of fair value through profit or loss (FVTPL),
available for sale (AFS), hold to maturities (HTM), and loans and
receivables (LNR).

: Percentage of fair value through profit or loss (FVTPL) to total assets of

bank i period t.

,1

Income before extraordinary items for the year preceding year t; deflated
by market value of the equity three months after the year t-1 fiscal yearend.

: Percentage of fair value of available for sale (AFS) to total assets of bank
i period t.

: Percentage of fair value ofhold to maturities (HTM) to total assets of

bank i period t.

: 1 in each of the years since PSAK No. 50&55 (Revised 2006) was
mandatory adopted (2010-2011); 0 for preceding years before
implementation periods (2007-2009).

: Percentage of fair value ofloans and receivables (LNR) to total assets of

bank i period t.

H1 cannot be rejected if the value of tstat>t table for 7 coefficients in equations 3.1 and
for 9 the equation 3.2 is positive and significant, while H2 cannot be rejected if the
value of | t stat/2 |>| t

tabel/2 |

for 8 coefficients in equation 3.1 and for coefficient 15 , 16 ,

17 and 18 in equation 3.2.

3.3

Variables

3.3.1

Future Earnings Response Coefficient (FERC)

The study of relationship between accounting numbers (earnings) and the stock

price cannot be separated from study of Ball & Brown (1968). BB study shows
earnings announcement affect stock prices. The study has been evolved a lot and one of
them is examining the future earnings response coefficient (FERC). This study adopts
the measurements of Ettredge, Kwon, Smith, &Zarowin (2005) to measure markets
ability to anticipate future earnings (FERC), but does not include returns in the prior
period (t-1) because of data unavailability for some samples. The basic model of the
FERC in this study is as follows:
= + 0 1 + 1 + 2 +1 + (3.3)

Model 3.3 aims to examine the market expectation of future earnings that is
implied in stock price for the period. If the market has a positive expectation regarding
the realization of future earnings, the stock returns for the period will be related to
future earnings. Thus, coefficient 2 is a coefficient for FERC is expected to be positive
(Ettredge, et al., 2005).

Model in equations 3.1 and 3.2 are used to examine the effect of the fair value of
financial assets on the informations content of firms future earnings or future earnings
response coefficient (FERC) after mandatory adoption of PSAK 50 & 55 (revised
2006). The both models were derived from model 3.1. Mandatory adoption of PSAK 50
& 55 (revised 2006) for the banking industry is effective on January 1, 2010. Dummy
variable, POST is given a value of 1 if the observation period after mandatory adoption

of PSAK 50 & 55 (Revised 2006) is 2010-2011period and given a value of 0 if the

observation period before mandatory adoption of PSAK 50 & 55 (Revised 2006) or
2007-2009 period.
Hypothesis1that the informations content of firms future earningswill increase
after mandatory adoption of PSAK 50 & 55 (Revised 2006) which had been convergent
into

international

accounting

standardscannot

interactionbetweenFERCandPOSTvariablesis

be

rejectedif

significantly

the

coefficient
positive.

Whilehypothesis2which statesthat After the adoption of PSAK 50 & 55 (Revised 2006),

the use of fair value in financial assets will increase (decrease) the informations content
of firms future earningscannot be rejected if coefficient ofthe three ways
interactionbetweenFERC, financial assets(FVFA, FVTPL, AFS, HTM, andLNR),
andPOSTvariablesis significantly positive.
3.3.2 Fair Value of Financial Assets
The fair value of financial assets in this study were classified into four
categories, which are financial assets designated as at fair value through profit or loss
(fair value through profit or loss/FVTPL), held-to- maturity (HTM), loans and
receivables (LNR), and available-for-sale financial assets (AFS). Information on fair
value is obtained from the statement of financial position and if it is not found in the
statement of financial position, it is obtained from the disclosures segment of financial
assets.
To examine possibility ofdifferences of effect offair value ofeachasset categories
of financial assets, this study used analysis. The first, as inmodel 1(equation 3.1), the
four categories offair valueof financialassetsare grouped intoone category, fair value
offinancial assets(FVFA). The second, fair value offinancial assets(FVFA) then
decomposedasin model 2(equation 3.2). All variablesof financialassets are deflated by
totalassetsfor the period.

4. Data Analysis
4.1 Descriptive Statistics and Correlation Between Variables
Based on the minimum, maximum, and standard deviation in Table 4.1 (see
appendix) datas distribution for current and next period of earnings are relatively large.
The average financial assets which are measured using fair value are 58.02% of banks
total assets. The largest composition of banks financial assets is financial assets

recognized as fair value through profit or loss (FVTPL), which is 16.46% of the banks
total assets. It is followed by loans &receivable (LNR), held to maturity (HTM), and
available for sale (AFS) which respectively each mean value are 7.08%, 6.35%, and
3.66% of banks total assets.
Table 4.2 (see appendix) shows the correlation between variables as an initial
indication of relationship between variables in this study. Current earnings variable is
significantly positive correlated with prior period earnings and significantly negative
correlated with earnings in the next period. This result suggests that there is realization
of earnings in the current period (Et) and the previous period (Et-1) in the period after
current period (Et+1). The three categories of fair value of financial assets (AFS, HTM,
and LNR) significantly positive correlated with the total fair value of financial assets
(FVFA), but FVTPL is not significantly correlated with total fair value of financial
assets. This result indicates that the characteristic of fair value of FVTPL is relatively
different compared to the three other categories of financial assets. All earnings
variables are not significantly correlated with the return variable.

4.2 Results and Discussion

Table 4.3 in the appendix presents regression estimations results of the two
models. The effect of independent variables on the dependent variable in each model
respectively is 60.70% and 60.86%, ceteris paribus. In the both models, the interaction
coefficient Et+1*POST variable are significantly positive at alpha 10% (1.85874500>
1,725) and 1% (4.02905900> 2.326). The coefficient of FERC (Et+1) in model 2 is
significantly positive, but it is not significantly positive in model 1. This result indicates
that there is an increase in content of future earnings after mandatory adoption of PSAK
50 & 55 (revised 2006), but it is not supported with strong evidence.
The results of this study add empirical evidence regarding the claim that
mandatory adoption of financial reporting under IFRS may increase the value relevance
of accounting information as found in the study of Duh, et al., (2012). The relevant
information is used by the market in assessing of next period earnings banks
performance, so investor is able to make investment decisions in the current period.
The interaction coefficient of Et+1*FVFA*POST variable of model 1 is
significantly negative at alpha 10% with two tails test with estimation coefficient value
is -0.00150400. In the other hand, variable Et+1*POST is significantly positive with the
estimation coefficient value is 0.00142500, so the aggregate effect of fair value of

financial assets reduce information content of future banks earnings after mandatory
adoption of PSAK 50 & 55 (Revised 2006). The results of this study support the
hypothesis 2 as well as providing empirical evidence that the use of fair value of
financial assets after mandatory adoption of PSAK 50 & 55 (Revised 2006) generally
reduces the information content of bank's future earnings or markets ability to
anticipate future earnings.
The empirical evidence supports the argumentation that the use of fair value
increase unrealistic earnings volatility, so investors respond it negatively (Duh, et
al.,2012). This argumentation is strengthen by empirical evidence in Table 4.3 (see
appendix) that shows the fair value of financial assets (FVFA) variable is significantly
negative at alpha 5 % (two tails test). Implication of empirical evidence in model 1 is
providing general information that investors view the adoption of international
accounting standards increase the value relevance of earnings to help them in making
investment decisions.But, the use of fair value in financial assets can increase unrealistic
earnings volatility that responded negatively by investors, thus lowering the
informations content of futures earnings. This could be due to investors' difficulties in
assessing risks exposure for the use of the fair value of financial assets, so lowering the
use this information to assess the banks future performance.
To explore the difference responseof investors to the four types classifications
offinancial

assets,

table

4.3showsthatonly

theinteraction

coefficient

Et+1*AFS*POSTvariable issignificantly positive, while thecoefficient ofthe three other

variables,

namely

the

interaction

ofEt+1*FVTPL*POST,

Et+1*HTM*POST,

Et+1*LNR*POST are significantly negative. However, theaggregate impact of fair

value ofAFSis lowering the information content offuture earnings after mandatory
adoption of PSAK50&55(Revised 2006). It is shown from the differencebetweenthe
value

ofthe

coefficient

ofinteractionvariableof

Et+1*AFS(-3.84907000)

and

coefficientof interactionvariable of Et+1*AFS*POST(3.68126600) is negative.

The implication of this evidence is the fair values of four categories of financial
assets reduce the information content of future earnings after mandatory adoption of
PSAK 50 & 55 (Revised 2006) even though market still responses the use of fair value
other than fair value through profit or loss (FVTPL)positively. It makes sense, since the
use of fair value fair value through profit or loss (FVTPL) category does have a greater
impact on earnings volatility relative to the three other categories. The possible
explanation of this finding is due to proportion of the fair value through profit or loss

(FVTPL)category is much larger than the other three categories. It is 16.46 % ofbank
total assets. The proportion of the use of three other categories of fair value of financial
assets: loans and receivable (LNR), held to maturity (HTM), and available for sale
(AFS) are respectively only 7.08%, 6.35 %, and 3.66 % of banks total assets.
Thus, finding of model 2 strengthen the empirical findings of the first model,
that are: (i) there is increasing of the informations content of firms future
earnings(FERC) in the period after mandatory adoption of PSAK 50 &55; (ii) the use of
the fair value of the financial assets reduce the informations content of firms future
earnings(FERC) in the period after mandatory adoption of PSAK 50 and 55 are
probably caused by the impact of the use of fair value in financial assets will increase
unrealistic earnings volatility; (iii) the largest component that may reduce the
informations content of firms future earningsin period after mandatory adoption of
PSAK 50 & 55 is the use of the fair value of fair value through profit or loss (FVTPL)
category.
The implications of this study for regulator (accounting standard board and
capital market regulator) is providing information to socialize and educate about the use
of fair value in financial assets, so that investors will have better understanding
regarding the information content due to the use of fair value of financial assets which
can be used to assess the future risk and earnings performance.

5. Conclusion, Limitation, and Future Research

This study adds empirical evidence to the accounting literature about value
relevance of accounting information (earnings) to investors in the capital market,
especially regarding the impact of the use of fair value of financial assets on the
informations content of firms future earnings(FERC) after mandatory adoption of
PSAK 50 & 55 (Revised 2006) in banking industry.
The result shows that the information content of future earnings increases in the
period after mandatory adoption of PSAK 50 & 55 (Revised 2006) in banking industry.
The result of this study supports the claim that financial reporting which is already
convergent into international accounting standards will improve the quality of financial
reporting by providing more relevant information for investors in the capital market.
The relevant information used by investors to assess future banks performance
(earnings) in making investment decisions in the current period that is reflected in share
price (return).

In general, mandatory adoption of PSAK 50 & 55 (Revised 2006) increases the

information content of future earnings, but the use of fair value of the financial assets
responded is negatively by investors due to the application of fair value of financial
assets is likely to have impact on unrealistic of earnings volatility. As a result, investors
find difficulty to assess risk and performance of banks financial assets. Thus, investors
find difficulty to assess future banks performance (earnings), which in turn decreasing
the markets ability to anticipate future banks earnings. The biggest component that may
reduce the markets ability to anticipate future banks earnings in the period after
mandatory adoption of PSAK 50 & 55 is the use of the fair value of financial assets
through profit category or loss (FVTPL).
This study has several limitations are: (i) the results of the study cannot be
generalized to other industries, except banking industry, (ii) the study did not consider
the fair value of bank liabilities that may affect the results of the study, (iii) the study
did not analyze the impact of the use of the fair value of the information content of
current earnings (ERC) after mandatory adoption of PSAK 50 & 55 (Revised 2006), due
to samples limitation; (iv) this study did not add control variables that might affect
results. Therefore, future studies may address such limitations in their research.

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Appendix

Table 3.1 Sample Selection Process

Explanation
Listed banks in Indonesia Stock Exchange during
observation period
Number of observations period
Total initial observations
Number of unavailable financial statement data
Number of unavailable stock price data
Number of final samples (firms years)

Total
32
5
160
(15)
(7)
138

Table 4.1 Descriptive Statistics

Variables

Mean

Rit

Median

Maximum

Minimum

Std. Dev.

0.018808 0.014177

0.167647

-0.06366

0.03943

Et-1

0.260322 0.130588

3.216342

-1.085357

0.78021

Et

2.319447 0.07493

162.0616

-13.84371

15.05179

Et+1

0.673217 0.095342

72.64901

-149.6612

15.93275

FVFA

0.580219 0.601554

0.789085

0.152242

0.12272

FVTPL

0.164652 0.10716

1.809992

0.004817

0.189091

AFS

0.036673 0.004572

0.362363

0.071527

HTM

0.063559 0.022112

0.737517

0.105989

LNR

0.070855 0.023672

0.489085

0.098897

Observations

138

138

138

138

138

Table 4.2 Correlation between Variables

Correlation
t-Statistic
Rit
Et-1

Rit

Et-1

Et-2
FVTPL
AFS
HTM
LNR
FVFA

Et-2

FVTPL

AFS

HTM

LNR

FVFA

1
0.011894
0.137695

Et

Et

1
-----

0.078181

0.201998

0.907786

2.387512*

-0.033992

-0.021291

-0.197163

-0.393718

-0.246517

-2.328024*

-0.001017

-0.057006

-0.016509

0.017135

-0.011775

-0.660964

-0.191131

0.198385

0.105689

-0.006249

-0.026224

0.020573

-0.168303

1.230332

-0.072335

-0.303664

0.238204

-1.976438

-0.062587

-0.098238

-0.036979

0.032361

-0.202519

-0.077794

-0.725915

-1.142711

-0.42835

0.374803

-2.393932*

-0.903264

-0.035449

0.10721

-0.01545

-0.062494

-0.383019

-0.225702

-0.163704

-0.410614

1.248242

-0.178873

-0.724841

-4.799801*

-2.681896*

-1.920923*

0.00989

-0.014614

-0.051031

-0.007685

-0.075098

0.483392

0.2989

0.34794

0.114493

-0.169182

-0.591494

-0.088968

-0.871789

6.392104*

3.625771*

4.296133*

-----

*) tstat> t table, significant at alpha 5%

1
----1
----1
----1
----1
----1
-----

Table 4.3 Estimations Result of Research Models

Model 1

Model 2

Total Fair Value of Financial Assets

Fair Value of 4 Classifications of FVFA

Variables

Coefficient

t-Statistic

Prob.

C
Et-1
Et
Et+1

0.02544500
0.03992300
0.00006540
0.00009060
0.03257200
0.00018200
0.00041500
0.00142500
0.00150400

2.43453400
14.66018000
0.44599500
0.64953200

0.01630000
0*
0.65630000
0.51710000

-1.81989000
0.04056400
0.52048700
1.85874500

0.0711***
0.96770000
0.60360000
0.0653***

-1.93443300

0.0552***

FVFA
Et+1*FVFA
POST
Et+1*POST
Et+1*FVPA*POST

Coefficient

t-Statistic

Prob.

0.00439300
0.03768600
0.00005870
0.00027400

0.88215800
4.95700500
0.49402600
2.51113800

0.37950000
0*
0.62220000
0.0134*

0.00021900
0.86907000

0.29349200
4.02905900

0.76970000
0.0001*

FVTPL
AFS
HTM
LNR

-0.24052000
0.24745000
0.18968600
0.26552500

Et+1*FVTPL

-0.85504200

Et+1*AFS

-0.61513000

Et+1*HTM

-0.85092300

Et+1*LNR

-0.87419100

Et+1*FVTPL*POST
Et+1*AFS*POST

-0.08625700
0.20757800

Et+1*HTM*POST

-0.26535100

Et+1*LNR*POST

-0.00703200

Adjusted R-squared
F-statistic
Prob(F-statistic)

0.60703500
27.45393000
0.00000000

3.64695200
3.28938700
3.15971800
4.00638700
3.81061300
3.84907000
3.95267600
4.04620400
1.72901000
3.68126600
3.74732500
2.68370400

0.0004*
0.0013*
0.002*
0.0001*
0.0002*
0.0002*
0.0001*
0.0001*
0.0864***
0.0003*
0.0003*
0.0083*

0.60862000
13.53196000
0.00000000

Durbin-Watson stat
2.38127300
2.40651300
, is the annual stock return for year t, measured over the 12-month period ending three months after the
firms fiscal year-end. ,1 , , , dan ,+1 are respectively income before extraordinary items for the year t1, t, and t+1 deflated by market value of the equity three months after the year t-1 fiscal year-end. Total fair
value of financial, , sum of fair value through profit or loss (FVTPL), available for sale (AFS), hold to
maturities (HTM), and loans and receivables (LNR). All financial assets variables are deflated by current
period of banks total assets. POST is dummy variable; 1 in each of the years since PSAK No. 50&55 (Revised
2006) was mandatory adopted (2010-2011); 0 for preceding years before implementation periods (2007-2009).
*,**,** significant at alpha 1%, 5%, or 10%; one or two tails test.