Date of this Version
Journal of Accounting and Economics
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
© 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/
financial reporting, conservatism, timeliness of loss and gain recognition, international accounting, political and legal institutions, contracting, compensation and incentives, debt contracts
Guay, W. R., & Verrecchia, R. E. (2006). Discussion of an Economic Framework for Conservative Accounting and Bushman and Piotroski (2006). Journal of Accounting and Economics, 42 (1-2), 149-165. http://dx.doi.org/10.1016/j.jacceco.2006.03.003
Date Posted: 27 November 2017
This document has been peer reviewed.