The fair value of investment property and stock price crash risk

This study examines whether recognizing fair value of investment property is more associated with stock price crash risk than recognizing historical cost of investment property. Using a sample of publicly traded firms that held investment property from 2007 through 2011 in China, we find that firms that recognize investment property at fair value in China experience an increase in crash risk. The findings suggest that fair value reporting for investment property in China does not convey private managerial information regarding firm value and could be a channel for concealing information. In additional analysis, we also find evidence that the association between fair value reporting and increased crash risk is mitigated in firms with strong corporate governance.