However, the effect of fair value measurement—relative to other accounting measurement bases—on investment efficiency is largely unexplored. We address this gap in the literature by studying measures of investment efficiency across firms that apply fair value measurement to the bulk of their operating asset base, relative to those that apply depreciated cost measurement.

We also analyze the extent to which salient attributes of fair value measurement (i.e., recognition versus disclosure, reliability, and disclosure quality) influence the effect of fair value measurement on investment efficiency. We conduct our time-series, cross-sectional, and difference-in-differences tests in the European real estate firms around mandatory IFRS adoption (2002-2008), as this setting provides several advantages that facilitate causal inference. Initial results provide modest evidence that fair value measurement decreases investment efficiency when excluding the year 2008 as the peak of the financial crisis.

Our findings are of potential interest to investors and policy-makers as they shed light on the conditions under which fair value measurement and its salient characteristics affects corporate investment behaviour.

Keywords: accounting measurement; fair value; investment efficiency; real estate; IFRS

Data Availability: data are available from public sources identified in the manuscript.