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Earnings conservatism: panel data evidence from the European Union and the United States
Author(s) -
Grambovas Christos A.,
Giner Begoña,
Christodoulou Demetris
Publication year - 2006
Publication title -
abacus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.632
H-Index - 45
eISSN - 1467-6281
pISSN - 0001-3072
DOI - 10.1111/j.1467-6281.2006.00205.x
Subject(s) - conservatism , earnings , european union , panel data , convergence (economics) , economics , econometrics , monetary economics , accounting , macroeconomics , international economics , political science , politics , law
This paper focuses on earnings conservatism, and provides new evidence based on procedures that account for variability at the firm level, drawing a comparison between the European Union and the United States. A key finding is that the estimated responsiveness of earnings to bad news is substantially higher when unobserved firm‐specific effects are modelled. Furthermore, it is shown that accounting has become more conservative not only in the U.S. but also in the EU when taken as a whole, and there is little evidence of marked differences in the asymmetric timeliness of earnings between the two. Indeed, any changes in this property of earnings are likely to be attributable to a common factor that influences firms similarly in both locations, and not necessarily to the process of economic convergence that has taken place in the EU.