International Differences in the Value-Relevance of Accounting Numbers : Timeliness, Permanence and Conservatism Under U.S. And U.K. Gaap

The empirical relationships between stock prices/returns, earnings and book value are informative about characteristics of accounting quality: conservatism in measurement of earnings and book value; earnings persistence; and earnings timeliness. In this paper we analyse the comparative accounting quality characteristics of the U.S. and U.K. GAAP regimes. We examine large panel data sets over a nineteen year period, controlling for inter- and intra-GAAP regime differences in firm size and industry membership. Our main findings are (i) U.S. earnings were less permanent; (ii) earnings were more timely in the U.K.; (iii) there is weak evidence that earnings recognition is more conservative in the U.S