McNichols, Maureen; Rajan, Madhav V.; Reichelstein, Stefan - 2014
We decompose the market-to-book ratio into two additive components: a conservatism correction factor and a future …-to-book ratio. The conservatism correction factor exceeds the benchmark value of one whenever the accounting for past transactions … has been subject to an (unconditional) conservatism bias. The observed history of a firm's past investments allows us to …