• Amrie Firmansyah Universitas Pembangunan Nasional Veteran Jakarta
  • Pria Aji Pamungkas Directorate General of Taxes, Ministry of Finance
  • Dani Kharismawan Prakosa Directorate General of Taxes, Ministry of Finance
  • Adhitya Jati Purwaka Directorate General of Taxes, Ministry of Finance
  • Muchamad Izaaz Hannun Bachtiar Directorate General of Financing and Risk Management, Ministry of Finance
Keywords: Fair Value, Market Model, Fama-French Model, Non-Systematic Risk


Systematic and non-systematic risk can both cause investment risk. Internal company conditions typically cause non-systematic risk. Diversification can help to mitigate this risk. This research aims to look into applying fair value to idiosyncratic risk. This quantitative study employs secondary data from manufacturing financial statements and stock data from the IDX. In addition, this study uses monthly data on 10-year government bond yields. Information on financial statements was obtained from, stock prices from, and monthly 10-year government bond yields from In total, 575 observations were used in this study (firm-year). We used multiple linear regression analysis on panel data to test the research hypothesis. The study finds that managers' fair value accounting relates to idiosyncratic risk. The results of this test apply to both the market and the Fama-French models. This study contributes to knowledge development concerning fair value testing, which still needs to be improved in developing countries.


Download data is not yet available.


Adwan, S., Alhaj-Ismail, A., & Girardone, C. (2020). Fair Value Accounting and Value Relevance of Equity Book Value and Net Income for European Financial Firms During The Crisis. Journal of International Accounting, Auditing and Taxation, 39(100320).

Annisa, R. H., & Taqwa, S. (2020). The Influence of Fair Value Accounting and The Board of Commissioners on Earning Management Moderated by The Role of Sharia (Empirical Study of Banking Companies Listed on The IDX 2015-2018). Jurnal Eksplorasi Akuntansi, 2(1), 2280–2298.

Bartram, S. M., Brown, G. W., & Stulz, R. M. (2017). Why Does Idiosyncratic Risk Increase with Market Risk? In CESifo Working Paper Series (No. 6560).

Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (14th ed.). Salemba Empat.

Chen, H. M., Lin, C. H., Kao, T. C., & Wei, T. J. (2016). The Effects of Corporate Governance on Idiosyncratic Risk: Evidence from Financial Institutions in Taiwan. Journal of Finance and Bank Management, 4(2), 10–16.

Chen, J. M. (2021). The Capital Asset Pricing Model. Encyclopedia, 1(3), 915–933.

Chen, R. C. Y., Hung, S., & Lee, C. (2018). Corporate Social Responsibility and Firm Idiosyncratic Risk in Different Market States. Corporate Social Responsibility and Environmental Management, 25(4), 642–658.

Chichernea, D. C., Petkevich, A., & Zykaj, B. B. (2015). Idiosyncratic Volatility, Institutional Ownership, and Investment Horizon. European Financial Management, 21(4), 613–645.

Chng, M. T., Fang, V., Xiang, V., & Zhang, H. F. (2017). Corporate Hedging and The High Idiosyncratic Volatility Low Return Puzzle. International Review of Finance, 17(3), 395–425.

Fajriana, N., & Aviyanti, R. D. (2019). Fair Value Accounting: The Endless Debate. Assets: Jurnal Akuntansi Dan Pendidikan, 8(1), 10–20.

Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25(2), 383–417.

Firmansyah, A., Andriyani, A. F., Mahrus, M. L., Febrian, W., & Jad, P. H. (2021). Cost of Corporate Capital in Indonesia: Social Responsibility and Corporate Governance. Jurnal Ekonomi, 26(3), 371–388.

Firmansyah, A., Utami, W., Umar, H., & Mulyani, S. D. (2020). The Role of Derivative Instruments on Risk Relevance from Emerging Market Non-Financial Companies. Journal of Governance and Regulation, 9(2), 45–63.

Geno, M. R. P., & Firmansyah, A. (2022). The Role of Corporate Governance in Investor Response to the Application of Fair Value of Investment Property and Fixed Assets in Indonesia. Owner, 6(2), 1292–1303.

Ghafoor, S., Zulfiqar, M., & Khurshid, M. (2019). Role of Corporate Governance to Mitigate The Idiosyncratic Risk in Non-Financial Sector of Pakistan Sadeen. European Online Journal of Natural and Social Sciences, 8(2), 224–238.

Ghanbari, M., Hayati, E., Taheri, M., & Kaki, M. (2018). Evaluating The Impact of Fair Value Accounting on Debt Structure and Financial Reporting of Listed Companies in Tehran Stock Exchange. Journal of Advanced Pharmacy Education & Research, 8(2), 176–180.

Hartzmark, S. M., & Solomon, D. S. (2022). Predictable price pressure.

Hasan, M. M., & Habib, A. (2019). Social Capital and Idiosyncratic Return Volatility. Australian Journal of Management, 44(1), 3–31.

Institute of Indonesia Chartered Accountants. (2015). IFRS 68 : Fair Value Measurement.

Januardi, N. V., & Arfianto, E. D. (2017). The Influence of Liquidity, Leverage, Operational Efficiency, Dividend Payout Ratio, Profitability and Company Size on Systematic and Non-Systematic Risk (Study of LQ45 Index Non-Financial Companies for the 2012-2016 Period). Diponegoro Journal of Management, 6(3), 391–404.

Jensen, M. C., & Meckling, W. H. (1976). Theory Of The Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economis, 72(10), 1671–1696.

Jones, C. P., & Jensen, G. R. (2016). Investments: Analysis and Management (13th ed.). New Jersey: John Wiley & Sons, Inc.

Khan, U. (2019). Does Fair Value Accounting Contribute to Systemic Risk in The Banking Industry? Contemporary Accounting Research, 36(4), 2588–2609.

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2018). Intermediate Accounting (3rd ed.). New Jersey: Wiley.

Kong, X., Pan, Y., Sun, H., & Taghizadeh-Hesary, F. (2020). Can Environmental Corporate Social Responsibility Reduce Firms’ Idiosyncratic Risk? Evidence From China. Frontiers in Environmental Science, 8, 1–15.

Li, S., & Zuo, X. (2020). Agency Costs in Family Business: A Review. Journal of Service Science and Management, 13(2), 377–387.

Magnan, M., Wang, H., & Shi, Y. (2022). Fair Value Accounting and The Cost of Debt: The Role of Auditor Expertise. SSRN Electronic Journal.

Maurice, Y., Mard, Y., & Séverin, É. (2020). The Effect of Earnings Management on Debt Maturity: An International Study. Comptabilité Contrôle Audit, 26(2), 125–156.

Mihov, A., & Naranjo, A. (2017). Customer Base Concentration and The Transmission of Idiosyncratic Volatility Along The Vertical Chain. Journal of Empirical Finance, 40, 73–100.

Ng, S., & Daromes, F. E. (2016). The Role of Managerial Ability as a Mechanism for Improving Earnings Quality. Jurnal Akuntansi Dan Keuangan Indonesia, 13(2), 174–193.

Palasari, D. (2018). The Effect of Implementing Fair Value Accounting on Indications of Financial Report Manipulation (Empirical Study of Financial and Banking Industry Companies Listed on the IDX in 2012-2016). Padang State University.

Pamungkas, P. A., Firmasnyah, A., Qadri, R. A., Dinarjito, A., & Arfiansyah, Z. (2021). The Role of Integrated Reporting in Emerging Market: Earnings Quality and Debt Maturity. Jurnal Manajemen, 25(3), 380.

Pascayanti, Y., Rahman, A. F., & Andayani, W. (2017). The Relevance of The Fair Value of Assets and Liabilities with Good Corporate Governance Mechanisms as a Moderating Variable. InFestasi, 13(1), 227–242.

Petra, S., & Spieler, A. C. (2020). Accounting Scandals: Enron, Worldcom, and Global Crossing. In Corporate Fraud Exposed (pp. 343–360). Bingley: Emerald Publishing Limited.

Prakosa, D. K., Kusumawati, R., Dinarjito, A., Mabrur, A., Kurniawati, L., Arfiansyah, Z., Andriani, A. F., Wijaya, S., Kustiani, N. A., Irawan, F., Wibowo, P., Qadri, R. A., Firmansyah, A., & Mahrus, M. L. (2022). Earnings Management Motives, Idiosyncratic Risk and Corporate Social Responsibility in An Emerging Market. Journal of Governance and Regulation, 11(3), 121–147.

Rey, A., Tuccillo, D., & Roberto, F. (2020). Earnings Management and Debt Maturity: Evidence from Italy. Corporate Ownership and Control, 17(3), 179–186.

Saputra, J. (2020). Some Forms of Investor RiskTolerance in Investing: Review Theory. International Journal of Research in Community Services, 1(3), 23–28.

Scott, W. R. (2015). Financial Accounting Theory (7th ed.). Toronto: Pearson Canada Inc.

Suhanda, N. H., & Firmansyah, A. (2020). The Role of Supply Chain Management in the Relationship between Earnings Management and Idiosyncratic Volatility. International Journal of Supply Chain Management, 9(3), 1186–1200.

Tzouvanas, P., Kizys, R., Chatziantoniou, I., & Sagitova, R. (2020). Environmental Disclosure and Idiosyncratic Risk in The European Manufacturing Sector. Energy Economics, 87(104715).

Wang, H., & Zhang, J. (2017). Fair Value Accounting and Corporate Debt Structure. Advances in Accounting, 37, 46–57.

Wu, T., Fu, Q., & Liu, X. (2020). Effect of Fair Value Measurement Model of Investment Property on Company Financial Risks in China. 2020 International Conference on Computer Network, Electronic and Automation (ICCNEA), 59–65.

How to Cite
Firmansyah, A., Pamungkas, P., Prakosa, D., Purwaka, A. and Bachtiar, M. 2023. DO FAIR VALUE DECISIONS INCREASE IDIOSYNCRATIC RISK?. Riset: Jurnal Aplikasi Ekonomi Akuntansi dan Bisnis. 5, 2 (Sep. 2023), 061 - 074. DOI: