Abstract

http://ssrn.com/abstract=606841
 
 

Citations (104)



 


 



Measuring Reporting Conservatism


Dan Givoly


Pennsylvania State University, Smeal College of Business

Carla Hayn


University of California at Los Angeles - Anderson School of Management

Ashok Natarajan


California State Polytechnic University, Pomona

October 2004


Abstract:     
The paper examines the power and reliability of the differential timeliness measure (DT) developed by (Basu (1997) to gauge reporting conservatism. We identify certain characteristics of the information environment unrelated to conservatism that affect the DT measure and find that the measure is sensitive to the degree of uniformity in the content of the news during the examined period, the types of events occurring in the period, and the firm's disclosure policies. Our tests, based on both actual and simulated data, indicate that assessing the extent of reporting conservatism requires the recognition of, and control for, these characteristics. We also find that the difference in the timeliness of bad versus good news is likely to be more pronounced than previously reported. Further, we provide additional evidence on the negative association between the DT measure and alternative aspects of conservatism, suggesting that the exclusive reliance on any single measure for assessing the overall conservatism of a reporting regime (firms, countries or time periods) is likely to lead to incorrect inferences.

Number of Pages in PDF File: 49

Keywords: Conservatism, asymmetric timeliness, disclosures, quality of Earnings, earnings management

JEL Classification: M41, M44

working papers series





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Date posted: October 19, 2004  

Suggested Citation

Givoly, Dan and Hayn, Carla and Natarajan, Ashok, Measuring Reporting Conservatism (October 2004). Available at SSRN: http://ssrn.com/abstract=606841 or http://dx.doi.org/10.2139/ssrn.606841

Contact Information

Dan Givoly
Pennsylvania State University, Smeal College of Business ( email )
206 Beam Business Administration Building
University Park, PA 16802
United States
814-865-0041 (Phone)
814-863-8393 (Fax)
Carla Hayn (Contact Author)
University of California at Los Angeles - Anderson School of Management ( email )
D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-206-9225 (Phone)
Ashok Natarajan
California State Polytechnic University, Pomona ( email )
3801 W. Temple Avenue
Pomona, CA 91768
United States
(909) 869-4539 (Phone)
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