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...

The weaknesses of using accounting results in performance evaluation have been widely discussed in many publications and academic researches. In one of their studies, Lev, B. and Zarowin, P. (1999) found that the association between reported earning and stock returns is not only weak, but...

Prior research provides evidence that financial-statement users weight information less heavily in judgment when that information is provided in a less accessible format (e.g., information disclosed in a footnote or less important financial statement rather than being recognized on the income...

I investigate the relationship between contemporaneous stock price performance and the persistence of accrued earnings, and its impact on the accrual anomaly. I find that in a fiscal year, accrued earnings for stocks that have performed poorly are less persistent in predicting future earnings...

When annual earnings are regressed on annual returns, the returns coefficient is higher when returns are negative. The difference between the coefficients of earnings on positive and negative returns is called asymmetric timeliness of earnings and, in the accounting literature, is used...

I document a large and significant diversification discount in multi-division firms that are diversified neither industrially nor geographically. All divisions of these firms, which are called quot;pseudo-conglomeratesquot;, operate in the same finely defined industry. Since divisions of...

On the basis of accounting and market data for firms and groups listed on German stock exchanges between 1997 and 2003, we show that the value relevance of Ramp;D information under German accounting standards can be superior to that provided by US-GAAP and IAS. The results, obtained while...

The shareholder value creation is becoming an answer to the pressure of the investors and councils. Many approaches are available. Among them, the Economic Value Added (EVA), developed by Stern Stewart amp; Co. To correct the improprieties perceived in financial statements, some users of EVA...

Income reported to shareholders (book income) and income reported to the U.S. Internal Revenue Service (taxable income) are alternative measures of U.S. corporate economic performance discussed in recent research, academic texts, and by U.S. legislators. In measuring economic performance,...

Two standard setting approaches have emerged globally to guide the choice of accounting for securitizations: the control and components approach (FAS125/FAS140) and the risks and rewards transfer approach (IAS39). A lack of consensus about derecognition accounting is a major impediment to...