Abstract

http://ssrn.com/abstract=212708
 
 

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Scale and Scale Effects in Market-Based Accounting Research


Peter D. Easton


University of Notre Dame - Department of Accountancy

Gregory A. Sommers


Southern Methodist University (SMU) - Edwin L. Cox School of Business


Journal of Business Finance & Accounting, p. 25-56, January 2003

Abstract:     
The nature of the data we usually encounter in market-based accounting research is such that the results of the regression of market capitalization on financial statement data are driven by a relatively small subset of the very largest firms in the sample. We refer to this overwhelming influence of the largest firms as the "scale effect". Firms with large price per share (and large "per share" accounting variables) have a similar effect. This effect is more than heteroscedasticity. It arises due to the non-linearity in the relation between market capitalization (price per share) and the financial statement variables.

Number of Pages in PDF File: 57

JEL Classification: M41, C10

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Date posted: April 22, 2000  

Suggested Citation

Easton, Peter D. and Sommers, Gregory A., Scale and Scale Effects in Market-Based Accounting Research. Journal of Business Finance & Accounting, p. 25-56, January 2003. Available at SSRN: http://ssrn.com/abstract=212708 or http://dx.doi.org/10.2139/ssrn.212708

Contact Information

Peter D. Easton (Contact Author)
University of Notre Dame - Department of Accountancy ( email )
Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6096 (Phone)
574-631-5127 (Fax)
Gregory A. Sommers
Southern Methodist University (SMU) - Edwin L. Cox School of Business ( email )
P.O. Box 750333
Dallas, TX 75275-0333
United States
214-768-1188 (Phone)
214-768-4099 (Fax)
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