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LIFO‐FIFO, ACCOUNTING RATIOS AND MARKET RISK: A RE‐ASSESSMENT
Author(s) -
Elgers Pieter T.,
Murray Dennis
Publication year - 1984
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1984.tb00752.x
Subject(s) - fifo and lifo accounting , activity based costing , fifo (computing and electronics) , inventory valuation , actuarial science , accounting , econometrics , economics , business , computer science , computer hardware
This paper re‐examines the effect of the inventory costing method on the association between accounting risk measures (ARMs) and market risk, and extends earlier research in several respects. The groups of FIFO and LIFO firms are matched on the basis of various financial characteristics to reduce selfselection bias, and the effect of inventory costing methods on the usefulness of ARMs in predicting market risk is investigated. The findings indicate that predictions based on FIFO show an improvement on market based predictions, but predictions based on LIFO fail to show such an improvement.