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- Title
More Evidence of Bias in the Differential Timeliness Measure of Conditional Conservatism.
- Authors
Patatoukas, Panos N.; Thomas, Jacob K.
- Abstract
Despite the conceptual appeal and popularity of the differential timeliness (DT) measure of conditional conservatism proposed in Basu (1997), Dietrich et al. (2007) and Givoly et al. (2007) have identified considerable biases associated with that measure. We renew their call to avoid using the DT measure because it is affected unexpectedly by two empirical regularities—namely, scale is negatively related to (1) deflated mean earnings and (2) variance of stock returns. Even though these regularities are unrelated to conditional conservatism, their joint effect is substantial and pervasive. More importantly, prior findings regarding time-series and crosssectional variation in differential timeliness are confounded by corresponding variation in these regularities.
- Subjects
ACCOUNTING; FINANCIAL statements; FAIR presentation; FINANCIAL disclosure; CORPORATE profits; CORPORATION reports
- Publication
Accounting Review, 2011, Vol 86, Issue 5, p1765
- ISSN
0001-4826
- Publication type
Article
- DOI
10.2308/accr-10101