Accounting Papers

Document Type

Journal Article

Date of this Version

10-2006

Publication Source

Journal of Accounting and Economics

Volume

42

Issue

1-2

Start Page

149

Last Page

165

DOI

10.1016/j.jacceco.2006.03.003

Abstract

We offer an economic framework for generating predictions about the demand for conservative accounting reports. We define conservatism as: More timely recognition of losses than gains as a result of the costs and benefits of reporting verifiable information by managers and/or firms being asymmetric. We also discuss Bushman and Piotroski's interpretation of the speeds of “good news recognition” and “incremental bad news recognition” in “Basu-type” regressions as separate signals about accounting conservatism. Finally, we suggest avenues for future research that seeks to investigate the links between institutions and contracts, and between contracts and conservatism

Copyright/Permission Statement

© 2006. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

financial reporting, conservatism, timeliness of loss and gain recognition, international accounting, political and legal institutions, contracting, compensation and incentives, debt contracts

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Date Posted: 27 November 2017

This document has been peer reviewed.