Estimation and Empirical Properties of a Firm-Year Measure of Accounting Conservatism
Preprint
- 17 August 2009
- preprint
- Published by Elsevier in SSRN Electronic Journal
Abstract
We estimate a firm-year measure of accounting conservatism, examine its empirical properties as a metric, and illustrate applications by testing new hypotheses that shed further light on the nature and effects of conservatism. The results are consistent with the measure, C_Score, capturing variation in conservatism and also predicting asymmetric earnings timeliness at horizons of up to three years ahead. Cross-sectional hypothesis tests suggest firms with longer investment cycles, higher idiosyncratic uncertainty and higher information asymmetry have higher accounting conservatism. Event studies suggest increased conservatism is a response to increases in information asymmetry and idiosyncratic uncertainty.Keywords
This publication has 35 references indexed in Scilit:
- The pricing of conservative accounting and the measurement of conservatism at the firm-year levelReview of Accounting Studies, 2009
- Conservatism and DebtJournal of Accounting and Economics, 2008
- A Point-in-Time Perspective on Through-the-Cycle RatingsCFA Magazine, 2006
- Conditional and Unconditional Conservatism:Concepts and ModelingReview of Accounting Studies, 2005
- Infrastructure Requirements for an Economically Efficient System of Public Financial Reporting and DisclosureBrookings-Wharton Papers on Financial Services, 2001
- The effect of international institutional factors on properties of accounting earningsJournal of Accounting and Economics, 2000
- The conservatism principle and the asymmetric timeliness of earnings1Journal of Accounting and Economics, 1997
- The Maturity Structure of Corporate DebtThe Journal of Finance, 1995
- No News is Good News: An Asymmetric Model of Changing Volatility in Stock ReturnsPublished by National Bureau of Economic Research ,1991
- Income Variation and Balance Sheet CompositionsJournal of Accounting Research, 1976