Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/55419
Title: Accounting-based downside risk, cost of capital, and the macroeconomy
Authors: Konchitchki, Y
Luo, Y
Ma, MLZ
Wu, F 
Keywords: Accounting performance
Cost of capital
Earnings downside risk
Financial statement analysis
Macroeconomy
Issue Date: 2016
Publisher: Springer
Source: Review of accounting studies, 2016, v. 21, no. 1, p. 1-36 How to cite?
Journal: Review of accounting studies 
Abstract: We hypothesize that earnings downside risk, capturing the expectation for future downward operating performance, contains distinct information about firm risk and varies with cost of capital in the cross section of firms. Consistent with the validity of the earnings downside risk measure, we find that, relative to low earnings downside risk firms, high earnings downside risk firms experience more negative operating performance over the subsequent period, are more sensitive to downward macroeconomic states, and are more strongly linked to earnings attributes and other risk-related measures from prior research. In line with our prediction, we also find that earnings downside risk explains variation in firms’ cost of capital, and that this link between earnings downside risk and cost of capital is incremental to several earnings attributes, accounting and risk factor betas, return downside risk, default risk, earnings volatility, and firm fundamentals. Overall, this study contributes to accounting research by demonstrating the key valuation and risk assessment roles of earnings downside risk derived from firms’ financial statements, also shedding new light on the link between accounting and the macroeconomy.
URI: http://hdl.handle.net/10397/55419
ISSN: 1380-6653
DOI: 10.1007/s11142-015-9338-7
Appears in Collections:Journal/Magazine Article

Access
View full-text via PolyU eLinks SFX Query
Show full item record

SCOPUSTM   
Citations

1
Last Week
0
Last month
Citations as of Sep 24, 2017

WEB OF SCIENCETM
Citations

1
Last Week
0
Last month
Citations as of Sep 22, 2017

Page view(s)

40
Last Week
2
Last month
Checked on Sep 25, 2017

Google ScholarTM

Check

Altmetric



Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.