Abstract

http://ssrn.com/abstract=2046190
 
 

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Principles-Based Standards and Earnings Attributes


David Folsom


Lehigh University

Paul Hribar


University of Iowa - Henry B. Tippie College of Business

Richard Mergenthaler Jr.


University of Iowa - Henry B. Tippie College of Business

Kyle Peterson


University of Oregon - Charles H. Lundquist School of Business

August 8, 2013


Abstract:     
This study examines the relation between principles-based standards and earnings attributes. We create a firm-level instrument that measures the extent to which firms are impacted by principles-based standards. We find that firmsā€™ earnings are more informative, persistent, and have a larger positive association with future cash flows when their standards are more principles-based. Our evidence is consistent with managers using the discretion provided by principles-based standards to communicate the economic substance of transactions rather than to distort earnings.

Number of Pages in PDF File: 52

Keywords: rules, principles, standards, earnings persistence, earnings attributes

JEL Classification: M41, M43, M44

working papers series


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Date posted: April 26, 2012 ; Last revised: August 10, 2013

Suggested Citation

Folsom, David and Hribar, Paul and Mergenthaler, Richard and Peterson, Kyle, Principles-Based Standards and Earnings Attributes (August 8, 2013). Available at SSRN: http://ssrn.com/abstract=2046190 or http://dx.doi.org/10.2139/ssrn.2046190

Contact Information

David Folsom
Lehigh University ( email )
Bethlehem, PA 18015
United States
Paul Hribar
University of Iowa - Henry B. Tippie College of Business ( email )
Dept. of Accounting
Iowa City, IA 52242-1000
United States
319-335-1008 (Phone)
Richard Dean Mergenthaler Jr. (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
319-335-0848 (Phone)
Kyle Peterson
University of Oregon - Charles H. Lundquist School of Business ( email )
1208 University of Oregon
Eugene, OR 97403-1208
United States
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