Is financial reporting shaped by equity markets or by debt markets? An international study of timeliness and conservatism

Is financial reporting shaped by equity markets or by debt markets? An international study of... We hypothesize debt markets—not equity markets—are the primary influence on “association” metrics studied since Ball and Brown (1968 J Account Res 6:159–178). Debt markets demand high scores on timeliness, conservatism and Lev’s (1989 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. Review of Accounting Studies Springer Journals

Is financial reporting shaped by equity markets or by debt markets? An international study of timeliness and conservatism

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Springer US
Copyright © 2008 by Springer Science+Business Media, LLC
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
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