RT Journal Article
T1 Information consequences of accounting conservatism
A1 García-Lara, Juan M.
A1 Garcia Osma, Beatriz
A1 Penalva, Fernando
AB We study the information consequences of conservatism in accounting. Prior research shows that information asymmetries in capital markets lead to firm-level increases in conservatism. In this paper, we further argue that increases in conservatism improve the firm information environment and lead to subsequent decreases in information asymmetries between firm insiders and outsiders. We predict and test if this decrease in information asymmetries manifests itself through: (a) a decrease in the bid-ask spread and in stock-returns volatility, and (b) an improved information environment for financial analysts, leading to more precise and less dispersed forecasts, and to more analysts following the firm. Using a large US sample for the period 1977-2007 and several proxies for conservatism we find robust evidence consistent with our expectations. Our results are in line with conservatism being useful not only for debt-holders, but also for equity-holders.
PB Taylor & Francis
SN 0963-8180
YR 2014
FD 2014-04-01
LK https://hdl.handle.net/10016/35339
UL https://hdl.handle.net/10016/35339
LA eng
NO We acknowledge financial assistance from the Spanish Ministry of Education and Science (ECO2010–19314, ECO2008–06238/ECON and SEJ2007-67582/ECON), the ICJCE/AT1 UAM-Auditores Madrid Chair, IESE Research Division, the Government of Comunidad de Madrid (Grant CCG10-UC3M/HUM-4760) and the AECA Chair in Accounting and Auditing.
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RD 1 sept. 2024