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The Role of Accounting Conservatism in the Decreasing Book Equity of U.S. Firms

Author

Listed:
  • Haowen Luo

    (Doermer School of Business, Purdue University Fort Wayne, 2101 E. Coliseum Blvd, Neff Hall 350C, Fort Wayne, IN 46805, USA)

  • Bing Luo

    (Lam Family College of Business, San Francisco State University, 1600 Holloway Ave., San Francisco, CA 94132, USA)

  • S. Drew Peabody

    (Martha and Spencer Love School of Business, Elon University, 2075 Campus Box, Elon, NC 27244, USA)

Abstract

We offer a novel explanation for the widespread decline in U.S. firms’ reported book equity. We find that accounting conservatism is negatively associated with book equity, a result that is both economically and statistically significant, as well as robust to a variety of model specifications. Our findings suggest that the rise in accounting conservatism has significantly contributed to the declines in book equity over the decades.

Suggested Citation

  • Haowen Luo & Bing Luo & S. Drew Peabody, 2025. "The Role of Accounting Conservatism in the Decreasing Book Equity of U.S. Firms," IJFS, MDPI, vol. 13(3), pages 1-30, August.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:3:p:146-:d:1727216
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    References listed on IDEAS

    as
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