Please use this identifier to cite or link to this item:
Title: On the conditional conservatism measure : a robust estimation approach
Authors: Kim, S
Ohlson, JA 
Keywords: Theil-Sen estimator
Conditional conservatism
Scale effects
Issue Date: 2018
Publisher: Wiley-Blackwell
Source: Journal of business finance and accounting, Mar.-Apr. 2018, v. 45, no. 3-4, special issue, p. 395-409 How to cite?
Journal: Journal of business finance and accounting 
Abstract: Recent research, due to Patatoukas and Thomas (2011) and Ball, Kothari, and Nikolaev (2013), focuses on Basu's (1997) conditional conservatism measure and the existence of a denominator effect - whether the difference between the earnings-return coefficients of bad and good news firms (the Basu coefficient') is only due to the beginning-of-year price deflator. We address this issue head-on by applying the Theil-Sen (TS) estimation method, which obtains the same coefficient estimate regardless of the chosen deflator and is robust to outliers. Results show the following: (i) the Basu coefficient remains positive using TS; (ii) the Basu coefficients using TS are similar to those using OLS without scaling but much smaller than shown by scaled OLS; (iii) the scaled OLS estimates appear to be influenced by a few outliers; and (iv) OLS estimates are more volatile due to estimation error. In sum, the denominator effect does not overturn Basu's hypothesis but the magnitude and variation of the Basu coefficient is much smaller than traditional results show.
Description: Capital Markets Conference, Hong Kong Polytechnic University, School of Accounting & Finance, Faculty of Business, Hong Kong, Hong Kong, May 24-26, 2017
ISSN: 0306-686X
DOI: 10.1111/jbfa.12301
Appears in Collections:Journal/Magazine Article

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


Citations as of Apr 3, 2019


Last Week
Last month
Citations as of Apr 6, 2019

Page view(s)

Citations as of Apr 16, 2019

Google ScholarTM



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