The Earnings Quality and Information Processing Effects of Accounting Consistency

Autor:	Roy Schmardebeck, Kyle Peterson, T. Jeffrey Wilks
Rok vydání:	2015
Předmět:	Economics and Econometrics Accrual business.industry media_common.quotation_subject Information processing Accounting Information asymmetry Consistency (statistics) Earnings quality Economics Quality (business) Statistical dispersion Predictability business Finance media_common
Zdroj:	The Accounting Review. 90:2483-2514
ISSN:	1558-7967 0001-4826
Popis:	We specify measures of accounting consistency both across time and across firms based on the textual similarity of accounting policy footnotes disclosed in 10-K filings. We first examine how these measures relate to earnings quality. Accounting consistency over time is positively associated with a number of earnings quality proxies, including earnings persistence, predictability, accrual quality, and absolute discretionary accruals. We also find that lower consistency relative to other firms in the industry is associated with larger absolute accrual model residuals. Finally, we examine the information processing effects of accounting consistency. We find that greater accounting consistency in the time-series and the cross-section is associated with lower information asymmetry, as proxied by bid-ask spread and illiquidity. Greater cross-sectional consistency is also associated with greater analyst coverage, more accurate analyst forecasts, decreased dispersion in analyst forecasts, and stronger stock return synchronicity. Data Availability: The accounting consistency measures developed in this study are available upon request. All other data are available from the sources cited in the text. JEL Classifications: M41.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::aacbf073398702e52d6139d0009cf589 https://doi.org/10.2308/accr-51048 Zobrazit plný text záznamu Plný text ve formátu PDF