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- Title
Is financial reporting shaped by equity markets or by debt markets? An international study of timeliness and conservatism.
- Authors
Ball, Ray; Robin, Ashok; Sadka, Gil
- Abstract
We hypothesize debt markets—not equity markets—are the primary influence on “association” metrics studied since Ball and Brown ( J Account Res 6:159–178). Debt markets demand high scores on timeliness, conservatism and Lev’s ( J Account Res 27(supplement):153–192) R 2, because debt covenants utilize reported numbers. Equity markets do not rate financial reporting consistently with these metrics, because (among other things) they control for the total information incorporated in prices. Single-country studies shed little light on debt versus equity influences, in part because within-country firms operate under a homogeneous reporting regime. International data are consistent with our hypothesis. This is a fundamental issue in accounting.
- Subjects
MARKETS; FINANCIAL markets; DEBT; STOCK exchanges; CONSERVATISM; FINANCIAL statements; CORPORATION reports; FINANCIAL performance; BUSINESS finance
- Publication
Review of Accounting Studies, 2008, Vol 13, Issue 2/3, p168
- ISSN
1380-6653
- Publication type
Article
- DOI
10.1007/s11142-007-9064-x