Identifying accounting conservatism in the presence of skewness
Loading...
Access rights
openAccess
publishedVersion
URL
Journal Title
Journal ISSN
Volume Title
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
This publication is imported from Aalto University research portal.
View publication in the Research portal (opens in new window)
View/Open full text file from the Research portal (opens in new window)
View publication in the Research portal (opens in new window)
View/Open full text file from the Research portal (opens in new window)
Authors
Date
Department
Major/Subject
Mcode
Degree programme
Language
en
Pages
25
Series
Review of Quantitative Finance and Accounting, Volume 62, issue 2, pp. 553-577
Abstract
The asymmetric timeliness (AT) coefficient as a measure of accounting conservatism has been subject to much debate. We clarify the conditions under which the AT coefficient identifies accounting conservatism in the presence of skewness. Specifically, using an extensive simulation-based approach, we examine the joint impact of return skewness, earnings skewness, and return endogeneity. We show that skewness of returns and earnings distorts the AT coefficient as a measure of conservatism when returns are endogenous. While earnings skewness is a predicted consequence of conditional conservatism, return skewness is arguably unrelated to conservative reporting and cannot be tackled by simple skew reducing transformations or outlier-robust estimators. Empirically, we analyze AT and skewness of firms sorted on size and MTB, highlighting the importance of constant skewness across groups for accurate comparisons of accounting conservatism.Description
Publisher Copyright: © 2023, The Author(s).
Other note
Citation
Jarva, H & Lof, M 2024, 'Identifying accounting conservatism in the presence of skewness', Review of Quantitative Finance and Accounting, vol. 62, no. 2, pp. 553-577. https://doi.org/10.1007/s11156-023-01210-y