Identifying Accounting Conservatism in the Presence of Skewness

Henry Jarva; Matthijs Lof

doi:10.2139/ssrn.3151365

Identifying Accounting Conservatism in the Presence of Skewness

Tutkimustuotos: Artikkeli kirjassa/konferenssijulkaisussa › Conference article in proceedings › Scientific › vertaisarvioitu

156 Lataukset (Pure)

Abstrakti

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.

Alkuperäiskieli	Englanti
Otsikko	100th Anniversary Accounting Conference Final Papers
Kustantaja	Temple University
Sivumäärä	41
DOI - pysyväislinkit	https://doi.org/10.2139/ssrn.3151365
Tila	Julkaistu - 2018
OKM-julkaisutyyppi	A4 Artikkeli konferenssijulkaisussa
Tapahtuma	Anniversary Accounting Conference - Philadelphia, Yhdysvallat Kesto: 9 elok. 2018 → 10 elok. 2018 Konferenssinumero: 100

Julkaisusarja

Nimi	SSRN Electronic Journal
Kustantaja	SSRN
Numero	1
Vuosikerta	2018
ISSN (elektroninen)	1556-5068

Conference

Conference	Anniversary Accounting Conference
Maa/Alue	Yhdysvallat
Kaupunki	Philadelphia
Ajanjakso	09/08/2018 → 10/08/2018

Pääsy asiakirjaan

10.2139/ssrn.3151365

SSRN-id3151365Final published version, 791 KB

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title = "Identifying Accounting Conservatism in the Presence of Skewness",

abstract = "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. ",

keywords = "conditional conservatism, asymmetric timeliness, earnings-return relation, accruals, write-offs",

author = "Henry Jarva and Matthijs Lof",

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language = "English",

series = "SSRN Electronic Journal ",

publisher = "Temple University",

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TY - GEN

T1 - Identifying Accounting Conservatism in the Presence of Skewness

AU - Jarva, Henry

AU - Lof, Matthijs

N1 - Conference code: 100

PY - 2018

Y1 - 2018

N2 - 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.

AB - 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.

KW - conditional conservatism

KW - asymmetric timeliness

KW - earnings-return relation

KW - accruals

KW - write-offs

U2 - 10.2139/ssrn.3151365

DO - 10.2139/ssrn.3151365

M3 - Conference article in proceedings

T3 - SSRN Electronic Journal

BT - 100th Anniversary Accounting Conference Final Papers

PB - Temple University

T2 - Anniversary Accounting Conference

Y2 - 9 August 2018 through 10 August 2018

ER -

Identifying Accounting Conservatism in the Presence of Skewness

Abstrakti

Julkaisusarja

Conference

Pääsy asiakirjaan

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Laitteet

Aalto University Data Hub

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