Download or read book Accounting Conservatism and the Stock Market written by Carlo D'Augusta and published by Springer. This book was released on 2024-10-10 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book comprehensively examines accounting conservatism and its relationship with the stock market. Through a historical overview and a review of recent literature, it explores the evolution of conservatism research and the conceptual developments, measurement advancements, and empirical findings produced by academic scholars over the last decades. Additionally, it critically evaluates the applicability of conservatism models developed in the U.S. market to the Italian setting, offering a thorough analysis of their validity. Furthermore, the book presents novel empirical findings on conservatism's impact on the Italian stock market during the Covid-19 pandemic. This nuanced exploration offers valuable insights for academics, practitioners, and researchers seeking to understand the complexities of financial reporting practices in diverse market environments.

Download or read book Accounting Conservatism the Quality of Earnings and Stock Returns written by Stephen H. Penman and published by . This book was released on 2011 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Quality of earnings questions arise when firms that practice conservative accounting change the level of their investment in net operating assets: increases in net operating assets create quot;hidden reserves,quot; depressing earnings, and decreases in investment release hidden reserves into earnings. This paper develops diagnostics that capture this joint effect of investment and conservative accounting and finds that the diagnostics forecast differences in future return on net operating assets from the current return on net operating assets. Moreover, the diagnostics forecast stock returns, indicating that the stock market does not appreciate how conservatism and investment combine to raise quality questions about reported earnings.

Download or read book Accounting Conservatism Earnings Persistence and Pricing Multiples on Earnings written by Lucy Huajing Chen and published by . This book was released on 2014 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effect of accounting conservatism on earnings persistence and the stock market's valuation of earnings. Using a sample of U.S. companies during the period of 1988-2010, we find that firms with more conservative accounting generate less persistent earnings than firms with less conservative accounting. We also document that the pricing multiple on more conservative earnings is smaller than pricing multiples on less conservative earnings. Finally, we show that conditionally conservative earnings are less persistent than unconditionally conservative earnings and the pricing multiple on earnings is smaller for conditionally conservative earnings than for unconditionally conservative earnings. Our results improve our understanding of the characteristics of conservatively-reported earnings.

Download or read book Accounting Conservatism and the Stock Market written by Carlo D’Augusta and published by Springer Nature. This book was released on with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Does Conservatism Help or Hurt Market Efficiency written by Martin Dierker and published by . This book was released on 2006 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a theory of mandatory accounting conservatism as a means to avoid speculative bubbles and overvaluation. In a simple exchange economy where agents trade due to differences in opinion, we show that conservatism leads to a lower expected stock price than a full disclosure regime. Thus conservatism matters as investors cannot undo the known bias in the system. However, we show how conservatism hurts market efficiency in a frictionless, perfectly efficient financial market. This is no longer the case when markets are prone to overvaluation. When we introduce a short sale constraint, our model generates overvaluation as documented empirically by Diether, Malloy, and Scherbina (2002) and others. In such a scenario, we show how a conservative accounting system leads to more efficient prices than any unbiased full or partial disclosure regime. Thus, we explain how mandatory conservative standards such as the SEC's former ban on upward revisions of asset valuations can indeed curb in potential bubbles. In the process, we link the emerging literature on conservatism to the existing disclosure theories.

Download or read book Management Through Accounts written by James Harris Bliss and published by . This book was released on 1924 with total page 880 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Conditional and Unconditional Conservatism written by Julia Nasev and published by Springer Science & Business Media. This book was released on 2009-12-28 with total page 129 pages. Available in PDF, EPUB and Kindle. Book excerpt: Julia Nasev examines the impact of conservative accounting numbers on valuation estimates and on real economic decisions such as cost stickiness.

Download or read book Accounting Conservatism and Corporate Reporting in a High Information Asymmetry Environment written by Su Jin Kim and published by . This book was released on 2014 with total page 542 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates whether Initial Public Offering (IPO) firms adopt a high degree of conservatism in response to investors' demand for high quality earnings and subsequently experience increased capital market benefits. The accounting literature suggests that the enforcement of timely loss recognition under a conservative reporting policy can mitigate managerial opportunistic behavior reducing information asymmetries between managers and outside investors (e.g., Watts 2002; LaFond & Watts 2008). This thesis hypothesizes that such benefits of accounting conservatism should be more pronounced for IPO firms because there is inherently high information asymmetry in the IPO market. In particular, financial reports are one of the primary information sources available for investors that provide information regarding a firm's past and expected future performance. As a result, the IPO environment provides an important research setting to investigate the capital market consequences of accounting conservatism. Based on a large sample of U.S. IPO firms over the period from 1990 to 2010, this thesis investigates whether the extent to which accounting conservatism adopted by IPO firms can predict: (i) the well-documented IPO market anomalies, IPO underpricing and IPO long-term stock return underperformance, (ii) the probability of seasoned equity issue (SEO) in the post-IPO market and the costs associated with the SEO and (iii) the longevity of IPO firms. The empirical findings of this thesis suggest that firms adopt a higher degree of conservatism prior to going public in response to high information asymmetry at the IPO and issuers adopting higher conservatism incur a lower indirect cost of going public through less underpricing. The results also suggest that IPO issuers adopting higher conservatism are less likely to reissue equity within five years of the IPO, indicating that these firms do not have short-term cash needs soon after the IPO. However, these firms are more likely to be able to issue their next equity financing on more favorable terms by experiencing less SEO underpricing and better announcement returns. Moreover, the results indicate that issuers adopting a higher degree of conservatism face less risk of failure and survive longer in the stock market. In particular, these firms are more likely to acquire another entity within five years of the IPO and their acquisition announcement returns are positively associated with the extent of conservatism adopted prior to going public. This thesis makes a significant contribution to the literature on conservatism by providing empirical evidence that: (i) IPO issuers adopting a higher degree of conservatism experience various benefits that the capital markets offer in response to less uncertainty and information asymmetry; and shows (ii) how conservatism can contribute to resolving information asymmetry problems in the IPO market. Specifically, this thesis has important implications for accounting standard setters, policy makers and regulators associated with the IPO market. Against the recent movements of the Financial Accounting Standards Board (FASB) toward fair value accounting, the evidence in this thesis suggests that, in the absence of conservatism, the information quality of financial statements may be jeopardized in the IPO environment, leading to higher information asymmetry between firm insiders and outside investors.

Download or read book The Asymmetric Market Valuation of Nonrecurring Items and Accounting Conservatism written by Richard Zhe Wang and published by . This book was released on 2015 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the impact of accounting conservatism on the stock market's valuation of nonrecurring gains and losses. We argue that nonrecurring item gains and losses, also known as special items, have asymmetric market valuation multiples, which are proxied by the earning response coefficient (ERC). This paper has two main findings: (1) an asymmetry exists in the valuation of nonrecurring gains and losses; and (2) the asymmetry can be explained by the idea of accounting conservatism, which is the tendency that firms report economic losses on a timelier basis than economic gains. The above two findings are supported by our empirical tests, which show that nonrecurring losses are have a higher earnings response coefficient than nonrecurring gains, due to the fact that nonrecurring losses are impounded in earnings much quicker than the gains. Furthermore, as the level of conservatism increases within a firm, this asymmetry of market valuation becomes larger, signifying that the information content of negative nonrecurring items increases at a rate greater than that of positive nonrecurring items.

Download or read book The Effects of Accounting Conservatism on Financial Statements and Financial Statement Users written by George W. Ruch and published by . This book was released on 2014 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We review and analyze the accounting literature that examines the effects of accounting conservatism on financial statements and financial statement users. We begin by analyzing how conservatism affects the reported numbers on the financial statements. These studies primarily evaluate how conservatism affects earnings quality, including earnings persistence and the presence of earnings management. Next, we assess the effect of accounting conservatism on the users of the financial statements. We identify three primary users of the financial statements: (1) equity market users (2) debt market users and (3) corporate governance users. Within each of these categories we analyze the findings of prior research and explore unanswered research questions. By analyzing the effects of accounting conservatism from a diverse range of research topics, we inform the discussion on the costs and benefits of accounting conservatism.

Download or read book The Effect Accounting Conservatism in Emerging Market Using Lo Eko Model written by Marselinus Asri and published by . This book was released on 2017 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: The research aim is to examine other variables that also affect the relationship between conservatism and earnings quality in emerging market. Normal Corporate Governance is a set of mechanisms that can protect minority shareholders from expropriation by managers and insider shareholders with an emphasis on legal mechanisms.Data Population are companies listed in Indonesia Stock Exchange during the period 2010-20015. The sample selection is based on purposive sampling method with the purpose of obtaining a representative sample. An Alternative measure of accounting conservatism used is the instrumental variables of Accounting conservatism (VIKV) developed by Lo Eko (Lo, 2005). The quality of earnings can be measured through discretionary accruals calculated by way of setting aside total accruals (TACC) and nondiscretionary accruals (NDACC). In calculating DACC, Modified Jones Model is used because it is considered better among other models to measure earnings management (Dechow et al., 1995).The results of this study indicate that the Instrumental Variables Conservatism (VIK) has a significant positive effect on the Earning Quality. This means that management positively signals the application of accounting conservatism within the company and has an impact on improving the quality of earnings. The next investor is expected to provide more valuations by providing a high premium for the company's stock price.

Download or read book Cross Listing in Us Markets and Conservatism written by Martien Jan Peter Lubberink and published by . This book was released on 2006 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines conditional accounting conservatism (Basu, 1997) of international firms cross-listed on United States stock exchanges. We compare the conservatism of firms that cross-list choosing a US ADR programme offering the possibility to raise equity capital (ADR Level III) to similar firms that choose to not raise capital in US markets (ADR Level II). Our results show that the firms that have the option to raise capital display a higher level of conservatism than the firms that do not have that option. The difference in conservatism is more pronounced for firms from Common Law countries than for Code Law countries. This evidence suggests that firms intending to issue equity capital in order to finance future growth possibilities will provide credible and verifiable earnings information to investors. This puts into question the suggestion of Ball et al. (2005) that the demand for conservative accounting predominantly originates from debt markets.

Download or read book Essays on Accounting Conservatism written by Bong Hwan Kim and published by . This book was released on 2010 with total page 157 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the role of accounting conservatism in the debt market and equity market. In the first essay I examine whether post-borrowing accounting conservatism is related to initial debt-covenant slack. I find firms with low debt-covenant slack display a smaller increase in conservatism after borrowing compared to firms with high debt-covenant slack. I further find that this relation is more pronounced when the cost of debt-covenant breach is greater and is less pronounced when lenders have stronger monitoring incentives. This study supports the debt covenant hypothesis. The second essay investigates the impact of financial market competition on a firm's choice regarding accounting quality (co-authored). The estimates indicate that foreign bank entry is associated with improved accounting quality among firms, and this improvement is positively related to a firm's subsequent debt level. The increase in accounting quality is also greatest among private firms, smaller firms, less profitable firms, and firms more dependent on external financing. The third essay investigates whether conditional accounting conservatism has informational benefits to shareholders (co-authored). We find some evidence that higher current conditional conservatism is associated with lower probability of future bad news. We also find weak evidence that the stock market reacts stronger (weaker) to good (bad) earnings news of more conditionally conservative firms. Thus, we provide additional evidence that conditional conservatism affects stock prices.

Download or read book Organizational Strategy Structure and Process written by Raymond E. Miles and published by Stanford University Press. This book was released on 2003-03-26 with total page 424 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Books and articles come and go, endlessly. But a few do stick, and this book is such a one. Organizational Strategy, Structure, and Process broke fresh ground in the understanding of strategy at a time when thinking about strategy was still in its early days, and it has not been displaced since." —David J. Hickson, Emeritus Professor of International Management & Organization, University of Bradford School of Management Originally published in 1978, Organizational Strategy, Structure, and Process became an instant classic, as it bridged the formerly separate fields of strategic management and organizational behavior. In this Stanford Business Classics reissue, noted strategy scholar Donald Hambrick provides a new introduction that describes the book's contribution to the field of organization studies. Miles and Snow also contribute new introductory material to update the book's central concepts and themes. Organizational Strategy, Structure, and Process focuses on how organizations adapt to their environments. The book introduced a theoretical framework composed of a dynamic adaptive cycle and an empirically based strategy typology showing four different types of adaptation. This framework helped to define subsequent research by other scholars on important topics such as configurational analysis, organizational fit, strategic human resource management, and multi-firm network organizations.

Download or read book Financial Statement Analysis and Security Valuation written by Stephen H. Penman and published by . This book was released on 2010 with total page 754 pages. Available in PDF, EPUB and Kindle. Book excerpt: Valuation is at the heart of investing. A considerable part of the information for valuation is in the financial statements.Financial Statement Analysis and Security Valuation, 5 e by Stephen Penman shows students how to extract information from financial statements and use that data to value firms. The 5th edition shows how to handle the accounting in financial statements and use the financial statements as a lens to view a business and assess the value it generates.

Download or read book The Influence of Accounting Conservatism Managerial Ownership Dividend Policy Size Leverage Price Earnings Ratio Price to Book Value and Earning Per Share to Earning Management written by Rowland Bismark Pasaribu and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study aims to examine the relationship of accounting conservatism, managerial ownership, dividend policy, firm size, leverage, price earnings ratio, price to book value and earnings per share to earnings management. The analysis technique used is multiple linear regressions. The data used are secondary data obtained from Indonesia Stock Exchange and various web from the company's website. The results of the study found that on managerial ownership, leverage and Price Earnings Ratio has significant effect while accounting conservatism, dividend policy, firm size, price to book value (PBV) and earnings per share (EPS) have no significant effect to earnings management.

Download or read book Meet Beat Market Expectation Accounting Conservatism and Corporate Governance written by Bikki Jaggi and published by . This book was released on 2014 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting conservatism has been recognized as a reporting strategy that benefits shareholders and financial statement users. We hypothesize that managers in general are likely to sacrifice the benefit associated with accounting conservatism when adopting meeting/beating market expectations (hereafter MBME). Our findings show a negative association between MBME, proxied by analysts' consensus forecasts, and accounting conservatism, defined in terms of conditional conservatism (Basu, 1997; Ball and Shivakumar, 2005, 2006) and we show that such relationship is not a mechanical connection between reporting strategy and managerial incentives to report higher earnings. Further analysis show that the negative relationship still exists after controlling for expectation as well as accrual-based and real earnings management. However, we document that G-index (Gompers et al., 2003), reflecting corporate governance in terms of anti-takeover provisions, has a significant impact on the negative association between accounting conservatism and MBME. Such finding shows that firms with less anti-takeover provisions, proxied by G-index, are less likely to sacrifice the benefit associated with conservative accounting for MBME.