Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism
A substantial literature investigates conditional conservatism, defined as asymmetric accounting recognition of economic shocks (“news”), and how it depends on various market, political, and institutional variables. Studies typically assume the Basu [1997] asymmetric timeliness coefficient (the incr...
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| Muut tekijät: | |
| Aineistotyyppi: | Artikkeli |
| Kieli: | en_US |
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Wiley Blackwell
2014
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| Linkit: | http://hdl.handle.net/1721.1/87767 https://orcid.org/0000-0003-1120-1177 |
| _version_ | 1826188447153389568 |
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| author | BALL, RAY KOTHARI, S. P. NIKOLAEV, VALERI V. Kothari, S. P. |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management BALL, RAY KOTHARI, S. P. NIKOLAEV, VALERI V. Kothari, S. P. |
| author_sort | BALL, RAY |
| collection | MIT |
| description | A substantial literature investigates conditional conservatism, defined as asymmetric accounting recognition of economic shocks (“news”), and how it depends on various market, political, and institutional variables. Studies typically assume the Basu [1997] asymmetric timeliness coefficient (the incremental slope on negative returns in a piecewise-linear regression of accounting income on stock returns) is a valid conditional conservatism measure. We analyze the measure's validity, in the context of a model with accounting income incorporating different types of information with different lags, and with noise. We demonstrate that the asymmetric timeliness coefficient varies with firm characteristics affecting their information environments, such as the length of the firm's operating and investment cycles, and its degree of diversification. We particularly examine one characteristic, the extent to which “unbooked” information (such as revised expectations about rents and growth options) is independent of other information, and discuss the conditions under which a proxy for this characteristic is the market-to-book ratio. We also conclude that much criticism of the Basu regression misconstrues researchers’ objectives. |
| first_indexed | 2024-09-23T07:59:47Z |
| format | Article |
| id | mit-1721.1/87767 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T07:59:47Z |
| publishDate | 2014 |
| publisher | Wiley Blackwell |
| record_format | dspace |
| spelling | mit-1721.1/877672022-09-30T01:32:52Z Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism BALL, RAY KOTHARI, S. P. NIKOLAEV, VALERI V. Kothari, S. P. Sloan School of Management Kothari, S. P. A substantial literature investigates conditional conservatism, defined as asymmetric accounting recognition of economic shocks (“news”), and how it depends on various market, political, and institutional variables. Studies typically assume the Basu [1997] asymmetric timeliness coefficient (the incremental slope on negative returns in a piecewise-linear regression of accounting income on stock returns) is a valid conditional conservatism measure. We analyze the measure's validity, in the context of a model with accounting income incorporating different types of information with different lags, and with noise. We demonstrate that the asymmetric timeliness coefficient varies with firm characteristics affecting their information environments, such as the length of the firm's operating and investment cycles, and its degree of diversification. We particularly examine one characteristic, the extent to which “unbooked” information (such as revised expectations about rents and growth options) is independent of other information, and discuss the conditions under which a proxy for this characteristic is the market-to-book ratio. We also conclude that much criticism of the Basu regression misconstrues researchers’ objectives. 2014-06-13T15:26:10Z 2014-06-13T15:26:10Z 2013-12 2012-01 Article http://purl.org/eprint/type/JournalArticle 00218456 1475-679X http://hdl.handle.net/1721.1/87767 BALL, RAY, S. P. KOTHARI, and VALERI V. NIKOLAEV. “Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism.” Journal of Accounting Research 51, no. 5 (December 2013): 1071–1097. https://orcid.org/0000-0003-1120-1177 en_US http://dx.doi.org/10.1111/1475-679X.12026 Journal of Accounting Research Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Wiley Blackwell SSRN |
| spellingShingle | BALL, RAY KOTHARI, S. P. NIKOLAEV, VALERI V. Kothari, S. P. Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism |
| title | Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism |
| title_full | Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism |
| title_fullStr | Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism |
| title_full_unstemmed | Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism |
| title_short | Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism |
| title_sort | econometrics of the basu asymmetric timeliness coefficient and accounting conservatism |
| url | http://hdl.handle.net/1721.1/87767 https://orcid.org/0000-0003-1120-1177 |
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