Premium
Discussion of “Optimal Conservatism with Earnings Manipulation”
Author(s) -
Core John E.
Publication year - 2016
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1111/1911-3846.12249
Subject(s) - conservatism , earnings , key (lock) , accounting , economics , political science , computer science , law , computer security , politics
In this discussion, I briefly summarize the key features of Bertomeu, Darrough, and Xue's (hereafter BDX ) model. I then examine the four key assumptions that BDX employ to arrive at their results: (i) firms contract only on earnings; (ii) conservative earnings are better for contracting; (iii) conservatism motivates upward earnings manipulation; and (iv) conservatism is endogenous. I then briefly conclude.