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The Link between Conditional Conservatism and Cost Stickiness

  • Julia Nasev

Abstract

As a prominent characteristic of financial reporting, conditional conservatism has received great attention in the empirical financial accounting literature. Since financial reporting standards require a higher verification for the recognition of good compared to bad news, Basu (1997) argues that earnings will reflect bad news faster than good news. He assumes that if markets are efficient unlike earnings, returns will reflect good and bad news equally fast. Accordingly, he finds a stronger earnings-returns relation for bad news than for good news, branded as the asymmetric timeliness of earnings (see figure 1).

Keywords

Cash Flow Stock Return Good News Future Earning Operate Cash Flow 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Gabler | GWV Fachverlage GmbH 2009

Authors and Affiliations

  • Julia Nasev

There are no affiliations available

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