The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative?

Givoly, Dan; Hayn, Carla

doi:10.1016/s0165-4101(00)00024-0

Cited by 1,070 publications

(1,145 citation statements)

References 31 publications

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“…First method, asymmetric timeliness of earnings originally introduced by [1], while the second was accrual based method coined by [2]. However, these conservatism measure methods are based on accounting practices of firm performance.…”

Section: Measurements Of Accounting Conservatism and Investment Efficmentioning

confidence: 99%

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Accounting Conservatism Alleviates Firm’s Investment Efficiency: An Evidence from China

Razzaq¹

2016

IJBER

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Abstract:This study examined the association of accounting conservatism with investment efficiency, and its effects on investment efficiency by mitigating firms from under and over investments of listed companies in China (2002China ( to 2013. First, we find the existence of conservatism in accounting practices of Chinese firms, later to hypothesize that how conservatism improves investment efficiency to alleviate under or over investment stresses. Thus, our findings confirmed that accounting conservatism improves investment efficiency of Chinese firms by mitigating under (over) investments. Furthermore, significant correlation existed for investment efficiency with free cash flow and corporate governance such as CEO duality and percentage of board members. In robust test, we find conservatism reduces the CEO duality and top one shareholder tunneling effect which may cause agency problem.

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Section: Measurements Of Accounting Conservatism and Investment Efficmentioning

confidence: 99%

“…Researchers raised the importance of conservatism and argued its association with higher quality financial reporting. Many researchers [1,2,3,4] are of the view that accounting conservatism is still existing in our accounting system since long. Recently [5] explained the importance of accounting conservatism and its economic consequences.…”

Section: Introductionmentioning

confidence: 99%

Accounting Conservatism Alleviates Firm’s Investment Efficiency: An Evidence from China

Razzaq¹

2016

IJBER

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“…Specifically, this study explores if partnership audit firms provide larger incentive for auditors to influence clients' asymmetric timeliness of earnings by constraining aggressive reporting of accruals and persuading clients to report economic losses in a timely fashion. Earnings conservatism, in particular asymmetric timeliness of earnings, has been well documented in the United States (Basu, 1997;Givoly and Hayn, 2000) and worldwide (Ball et al, 2000). Therefore this study hypothesizes that when auditors' legal liability is lower for LLC organization form, they have less incentive to constraint clients to adopt conservative accounting methods.…”

Section: Introductionmentioning

confidence: 91%

Do the organization types of audit firms matter to earnings conservatism? Evidence from China

Weng

2017

Investment Management and Financial Innovations

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“…Empirical evidence (see e.g. Givoly & Hayn (2000)) shows that the cash flow variability is broadly of the same order of magnitude than its level, so by assuming an initial cash flow level of x 0 = 100, we set σ = 100. Further, we assume a drift of µ = 2.…”

Section: Optimal Coupon With Entrenched Managersmentioning

confidence: 99%

Informational Asymmetry Between Managers and Investors in the Optimal Capital Structure Decision

Bank

Lawrenz

2005

SSRN Journal

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In this article, we consider the impact of asymmetric information between managers and investors on the optimal capital structure decision. This is done within a continuous-time framework, where the relevant state variable is given by the EBIT value of the firm; an approach taken by (2004) amongst others. Our setup differs in that we assume the EBIT to follow an Arithmetic Brownian motion, i.e. it can assume negative values. More importantly, we extend this framework in two directions: (i) We introduce a separate management claim. (ii) We introduce asymmetric information between managers and investors by assuming that claimants receive noisy signals, which they process according to rational expectation principles.Our results show, that managers always try to avoid debt, and that their optimal bankruptcy threshold is always lower, than the threshold set by equity holders. The introduction of asymmetric information changes the optimality conditions, and consequently the capital structure decision. It is shown, that the informational asymmetry can substantially lower the optimal leverage ratio, even without assuming that managers are entrenched.

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The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative?

Cited by 1,070 publications

References 31 publications

Accounting Conservatism Alleviates Firm’s Investment Efficiency: An Evidence from China

Accounting Conservatism Alleviates Firm’s Investment Efficiency: An Evidence from China

Do the organization types of audit firms matter to earnings conservatism? Evidence from China

Informational Asymmetry Between Managers and Investors in the Optimal Capital Structure Decision

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