Comment On 'On Estimating Conditional Conservatism' by Ball, Kothari, and Nikolaev

37 Pages Posted: 5 Sep 2011

See all articles by Panos N. Patatoukas

Panos N. Patatoukas

University of California, Berkeley - Haas School of Business

Jacob K. Thomas

Yale School of Management

Date Written: September 5, 2011

Abstract

Ball, Kothari, and Nikolaev (2011) make two major claims in their recent working paper titled “On estimating conditional conservatism.” While they agree that the effect documented in Patatoukas and Thomas (2011) biases the conditional conservatism estimate proposed in Basu (1997), they claim that the source of bias is not scale effects but a non-linear relation between expected returns and expected earnings. Second, they propose revised measures of conditional conservatism, which they claim are unbiased. Our evidence contradicts both claims.

Keywords: Conservatism, Differential Timeliness, Earnings

JEL Classification: M40

Suggested Citation

Patatoukas, Panos N. and Thomas, Jacob Kandathil, Comment On 'On Estimating Conditional Conservatism' by Ball, Kothari, and Nikolaev (September 5, 2011). Available at SSRN: https://ssrn.com/abstract=1922833 or http://dx.doi.org/10.2139/ssrn.1922833

Panos N. Patatoukas (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

HOME PAGE: http://sites.google.com/site/panossom/

Jacob Kandathil Thomas

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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