The confounding effect of cost stickiness on conservatism estimates

• 成果类型: Article
• 署名作者: Banker, Rajiv D.; Basu, Sudipta; Byzalov, Dmitri; Chen, Janice Y. S.
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University; University of the Pacific
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2015.07.001
• 发表日期: 2016
• 关键词: unconditional conservatism; accounting conservatism; asymmetric timeliness; earnings; QUALITY

摘要

Sales decreases affect earnings more than sales increases because of cost stickiness. We hypothesize that this correlated omitted variable constitutes a confounding effect in standard asymmetric timeliness models. Controlling for a piecewise linear effect of sales changes in these models decreases the measured asymmetric timeliness significantly and changes inferences about the average level of conservatism and the extent of cross-sectional variation in conservatism. Validation tests confirm that the asymmetry for sales changes is consistent with sticky costs and is distinct from conditional conservatism. Future empirical research on conditional conservatism should recognize the potential confounding effect of sticky costs. (C) 2015 Elsevier B.V. All rights reserved.