[en] This paper investigates whether conditional accounting conservatism has informational benefits to financial market participants. Using a large sample of French firms over the period 2001-2014, we report that accounting conservatism improves the firm information environment by providing verifiable information. We specifically document that increases in accounting conservatism are associated with more accurate analyst earnings forecasts, less dispersed forecasts and less volatility in forecast revisions. We also provide evidence that increases in firm accounting conservatism lead to subsequent increases in stock market liquidity, tested on the price impact dimension. Overall, our findings are in line with conservatism being useful to financial markets participants such as financial analysts and investors.
Sougné, Danielle ; Université de Liège > HEC-Ecole de gestion : UER > Gestion financière et consolidation
Language :
English
Title :
Accounting conservatism, analysts’ performance and stock market liquidity
Publication date :
11 July 2016
Event name :
7th International Research Meeting in Business and Management
Event organizer :
IPAG Business School
Event place :
Nice, France
Event date :
du 11 juillet au 12 juillet 2016
By request :
Yes
References of the abstract :
This paper investigates whether conditional accounting conservatism has informational benefits to financial market participants. Using a large sample of French firms over the period 2001-2014, we report that accounting conservatism improves the firm information environment by providing verifiable information. We specifically document that increases in accounting conservatism are associated with more accurate analyst earnings forecasts, less dispersed forecasts and less volatility in forecast revisions. We also provide evidence that increases in firm accounting conservatism lead to subsequent increases in stock market liquidity, tested on the price impact dimension. Overall, our findings are in line with conservatism being useful to financial markets participants such as financial analysts and investors.
