Identifying Accounting Conservatism in the Presence of Skewness

Henry Jarva, Matthijs Lof

Research output: Chapter in Book/Report/Conference proceedingConference article in proceedingsScientificpeer-review

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We demonstrate analytically and by simulation that the asymmetric timeliness (AT) coefficient in the Basu (1997) model is not a reliable measure of accounting conservatism in the presence of skewness. Specifically, a significant AT coefficient arises mechanically as a consequence of skewness in returns and/or earnings. The implication of this result is that variation in AT estimates between groups reflect variation in conditional conservatism only under conditions that are rarely met in practice. We propose an alternative approach to identify conditional conservatism based on asymmetry in the conditional probability of accrual write-offs.
Original languageEnglish
Title of host publication100th Anniversary Accounting Conference Final Papers
PublisherTemple University
Number of pages41
Publication statusPublished - 2018
MoE publication typeA4 Conference publication
EventAnniversary Accounting Conference - Philadelphia, United States
Duration: 9 Aug 201810 Aug 2018
Conference number: 100

Publication series

NameSSRN Electronic Journal
ISSN (Electronic)1556-5068


ConferenceAnniversary Accounting Conference
Country/TerritoryUnited States


  • conditional conservatism
  • asymmetric timeliness
  • earnings-return relation
  • accruals
  • write-offs


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