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    Assessing the value relevance of fair value measurements: a South African perspective

    Matsane, Ayanda, Nakpodia, Franklin and Areneke, Geofry ORCID logoORCID: https://orcid.org/0000-0001-6075-2747 (2022) Assessing the value relevance of fair value measurements: a South African perspective. Corporate Governance: The International Journal of Business in Society, 22 (7). pp. 1405-1424. ISSN 1472-0701

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    Purpose: This article explores whether fair value Level 1 and Level 2 measurements are more value relevant than Level 3 fair value measurement in an inactive market. Specifically, this research addresses two objectives. First, it examines the value relevance of fair value measures for each disclosure level of fair value. Second, it assesses the impact of corporate governance on the value relevance of less observable fair value disclosures (Level 2 and Level 3). Design/Methodology: Drawing insights from agency theorising, this research adopts a quantitative approach (regression analysis) that investigates data from a less active financial market (South Africa). Findings: Contrary to agency theory suppositions, the results show that investors in a less active market value management inputs more than market (more transparent) information. We also observe that investors pay limited interest to corporate governance structures when pricing fair value measurement, implying that they rely on factors beyond corporate governance mechanisms. Originality/Value: Our findings offer useful evidence to standard setters and preparers of financial information. While the IASB suggests that investors value transparent financial information, the data shows that investors in inactive markets value management’s inputs more than those of the market

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