Unequal Impact of Conservatism on Accrual Measures and Drivers: Implications for the Specification of Accrual Models
AbstractThis study makes two main contributions to the literature. Firstly, it tests empirically the relative timeliness of accrual measures and earnings components used as explanatory variables in accrual models (“accrual drivers”) regarding the impact of conservatism. Secondly, taking into account the empirical evidence on such a timeliness, it discusses intuitively potential implications for the specification of (traditional) accrual models and the quality of discretionary accrual estimates. It concludes that common accrual models, as Jones (1991), are misspecified. They have a dependent variable (accruals) asymmetrically affected by conservatism, and one or more explanatory variables that are not affected, inducing a non-systematic measurement error in estimating discretionary accruals.
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Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 0604.
Length: 19 pages
Date of creation: May 2006
Date of revision:
accruals; accrual models; discretionary accruals; conservatism.;
Find related papers by JEL classification:
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-20 (All new papers)
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