exclude earnings management or abandonment options. 3 The Sudipta Basu Re-examination of The samples implemented The paper extends S. Basu investigated conservatism 1997 the conservatism for the test in this paper research on the the effects of the principle and the principle. consist of all firm-year timeliness of earnings conservatism asymmetric Investigation of the observations from 1963 by pointing out that the principle on timeliness of effects of the 1990 with returns data on timelines is reported financial earnings conservatism the center for research in asymmetrically greater statements and principle on security prices for bad news than for interprets reported financial NYSE/AMEX monthly files, goods news. S. Basu conservatism as statements. and with necessary states that in efficient resulting in earnings accounting data on the markets, stock returns reflecting bad news Compustat annual symmetrically and more quickly than industrial and research quickly reflect all good news. He files. (United States). publicly available indicated that the news, so he uses concurrent returns to measure sensitivity of news. The research of earnings to negative the conservatism returns is two to six principle is based on times as large as the four predictions. For concurrent the first prediction: sensitivity of earnings is more timely earnings to positive or concurrently returns and he also sensitive in reflecting showed that positive publicly available bad earnings changes news than good news tend to persist the researcher used whereas negative negative and positive earnings changes
exclude earnings management or abandonment options. 3 The conservatism principle and the asymmetric timeliness of earnings Sudipta Basu 1997 Re-examination of the conservatism principle. Investigation of the effects of the conservatism principle on reported financial statements. The samples implemented for the test in this paper consist of all firm-year observations from 1963 with returns data on the center for research in security prices NYSE/AMEX monthly files, and with necessary accounting data on the Compustat annual industrial and research files. (United States). The paper extends research on the timeliness of earnings by pointing out that the timelines is asymmetrically greater for bad news than for goods news. S. Basu states that in efficient markets, stock returns symmetrically and quickly reflect all publicly available news, so he uses returns to measure news. The research of the conservatism principle is based on four predictions. For the first prediction: earnings is more timely or concurrently sensitive in reflecting publicly available bad news than good news the researcher used negative and positive S. Basu investigated the effects of the conservatism principle on reported financial statements and interprets conservatism as resulting in earnings reflecting bad news more quickly than good news. He indicated that the concurrent sensitivity of earnings to negative returns is two to six times as large as the concurrent sensitivity of earnings to positive returns and he also showed that positive earnings changes tend to persist whereas negative earnings changes 1990