WSEAS Transactions on Business and Economics
Print ISSN: 1109-9526, E-ISSN: 2224-2899
Volume 13, 2016
Aggregate Market-Based Measurement of Country-Specific Balance-Sheet Conservatism
Authors: ,
Abstract: In this paper we review recent literature that following Givoly and Hayn (2000) methodology uses aggregate market-based measures to analyse time evolution of unconditional conservatism. We find that alternative specifications of Givoly and Hayn aggregate market-based measure are used as equivalent measures in the literature. At the same time, we find no analysis proving the goodness of this alternative measures. To highlight the consequences of use the alternative measures, we conduct an analysis of the evolution of unconditional conservatism using them. Concretely, we analyse the effect of International Financial Reporting Standards on the country-specific unconditional conservatism. Our results show that the use of specifications alternative to Givoly and Hayn aggregate market-based measure can result in misleading conclusions.
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Keywords: Aggregate book-to-market ratio, arithmetic mean of the ratios, IFRS adoption, market-based accounting research, ratio of the arithmetic means, unconditional conservatism
Pages: 498-513
WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 13, 2016, Art. #46