Abstract

This paper debates how fair-value accounting (FVA) that were deeply affected by the global financial crisis. The
global financial crisis started in advanced economies spreading to emerging markets and low-income countries.
Thus, it has been affected in the middle of 2007 and into 2009, which have examined the role of FVA in the
financial crisis. This paper is used the value-relevance of fair-value reported under FAS 157 that estimates assets
and liabilities in terms of a simple theoretical and empirical analysis literature framework. This empirical study
proposed is a global crisis that not a normal cyclical crisis of capitalism. Also, it requires a change in the
management policy to be tackled with new regulatory frameworks for financial institutions in order to stimulate
economic activities. In other words, FVA may have amplified the crisis. Future research is needed to meet
up-to-date information regarding the nature of capital markets and financial institutions. This requires a new
theory of economics; for instance, a change from equilibrium theory to reflexivity theory which requires a
change in the underlying model of the economic activity framework. Therefore, this study has concluded a new
theory of the change of equilibrium to reflexivity that led to develop the model in the framework of the economic
activity.

This work is licensed under a Creative Commons Attribution 4.0 License.