Valuation Specialists and Value Relevance of Fair Value Measurements: Evidence from International Banks

ABSTRACT This study examines the impact of engaging valuation specialists on the value relevance of Level 3 fair value measurements (FVMs) within the auditing process. Through an analysis of a sample of international commercial banks over the period from 2016 to 2019, this study reveals that both Level 1 and Level 2 FVMs are generally value relevant, regardless of the involvement of valuation specialists in the auditing process. However, the value relevance of Level 3 FVMs appears to be contingent upon the auditor’s utilization of valuation specialists during the audit of these measurements. The findings of this study indicate that, notwithstanding the concerns highlighted in prior research, investors tend to hold the conviction that valuation specialists can make a substantive and positive impact on the auditing process, thereby enhancing the value relevance of Level 3 FVMs. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G21; M41; M42.