firms are economically relevant and (2) accounting researchers and practitioners have a strong, ongoing interest in identifying reliable heuristics for assessing firms’ earnings quality. We believe our study presents two avenues for future research. First, studies of the empirical properties of R_SR and the relation between it and other measures of earnings quality will provide researchers with a better understanding of the relative advantages and disadvantages of our proxy and the types of research settings in which it is likely to be most useful. In addition, these studies may lead to improvements in how we construct R_SR or to alternative approaches for measuring aggregation. Second, exploration of the relation between economic factors such as unresolved agency problems, competitive issues, etc. and aggregation is a worthwhile endeavor as it will shed light on the manner in which earnings quality and these phenomena are codetermined. We present very preliminary results in this area; more work is necessary. References Ball, R. Requirements for an Economically Efficient System of Public Financial “Infrastructure Reporting and Disclosure.” (2001): Brookings-Wharton Papers on Financial Services 127-182. Ball, R., S. P. Kothari and A. Robin. Effect of International Institutional Factors on “The Properties of Accounting Earnings.” 29 (2000): Journal of Accounting and Economics 1-51. Ball, R. and L. Shivakumar. role of accruals in asymmetrically timely gain and loss “The recognition.” 44 (2006): 204–242. Journal of Accounting Research Bartov, E. timing of asset sales and earnings manipulation.” 68 The Accounting Review “The (1993): 840–855. Basu, S. Conservatism Principle and the Asymmetric Timeliness of Earnings.” Journal of “The 24 (1997): 3-37. Accounting and Economics Bens, D. and S. Monahan. Quality and the Excess Value of Diversification.” Journal “Disclosure 42 (2004): 691-730. of Accounting Research
firms are economically relevant and (2) accounting researchers and practitioners have a strong, ongoing interest in identifying reliable heuristics for assessing firms’ earnings quality. We believe our study presents two avenues for future research. First, studies of the empirical properties of R_SR and the relation between it and other measures of earnings quality will provide researchers with a better understanding of the relative advantages and disadvantages of our proxy and the types of research settings in which it is likely to be most useful. In addition, these studies may lead to improvements in how we construct R_SR or to alternative approaches for measuring aggregation. Second, exploration of the relation between economic factors such as unresolved agency problems, competitive issues, etc. and aggregation is a worthwhile endeavor as it will shed light on the manner in which earnings quality and these phenomena are codetermined. We present very preliminary results in this area; more work is necessary. References Ball, R. “Infrastructure Requirements for an Economically Efficient System of Public Financial Reporting and Disclosure.” Brookings-Wharton Papers on Financial Services (2001): 127-182. Ball, R., S. P. Kothari and A. Robin. “The Effect of International Institutional Factors on Properties of Accounting Earnings.” Journal of Accounting and Economics 29 (2000): 1-51. Ball, R. and L. Shivakumar. “The role of accruals in asymmetrically timely gain and loss recognition.” Journal of Accounting Research 44 (2006): 204–242. Bartov, E. “The timing of asset sales and earnings manipulation.” The Accounting Review 68 (1993): 840–855. Basu, S. “The Conservatism Principle and the Asymmetric Timeliness of Earnings.” Journal of Accounting and Economics 24 (1997): 3-37. Bens, D. and S. Monahan. “Disclosure Quality and the Excess Value of Diversification.” Journal of Accounting Research 42 (2004): 691-730.
BMS%2004.12.13%20LS%20Edit-1.docx