José António Moreira () (CETE, Faculdade de Economia, Universidade do Porto)
Abstract
This paper discusses the sign of the expected measurement error in discretionary accruals (DAC) estimates when accrual models do not control for the asymmetric treatment of gains and losses underlying conservatism. I find that DAC in firms with “bad news” are expected to be understated (positive measurement error), while those in “good news” firms will be overstated (negative measurement error). Based on this original result and using graphical analysis I discuss an empirical illustration, which corroborates the expectations.
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Publisher Info
Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CETE Discussion Papers with number
0606.
Find related papers by JEL classification: M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
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