Investor Sentiment and Conditional Accounting Conservatism

2017 ◽  
Author(s):  
Rui Ge ◽  
Nicholas Seybert ◽  
Feida Zhang
Keyword(s):  
Investor Sentiment ◽  
Accounting Conservatism

Investor Sentiment and Accounting Conservatism

2018 ◽  
Vol 33 (1) ◽  
pp. 83-102
Author(s):  
Rui Ge ◽  
Nicholas Seybert ◽  
Feida (Frank) Zhang
Keyword(s):  
Investor Sentiment ◽  
Accounting Conservatism ◽  
Economic Losses ◽  
Price Sensitivity ◽  
Litigation Risk ◽  
Timely Manner ◽  
Financial Expert

SYNOPSIS This paper investigates the association between investor sentiment and accounting conservatism. We find that managers recognize economic losses in earnings in a more timely manner during periods of high investor sentiment. Further, the sentiment-conservatism relation is stronger for firms with greater sentiment-price sensitivity. We also find that the sentiment-conservatism association is stronger for firms with higher litigation risk and financial expert CEOs, and is weaker for firms with retiring CEOs. Overall, our results suggest that firms report earnings more conservatively in response to higher investor sentiment in order to mitigate potential litigation costs. These findings have implications for regulators and standard setters who have deemphasized accounting conservatism in recent years.

Investor sentiment and accounting conservatism: evidence from Iran

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saeid Aliahmadi
Keyword(s):  
Capital Market ◽  
Negative Impact ◽  
Investor Sentiment ◽  
Accounting Conservatism ◽  
Bad News ◽  
Economic Losses ◽  
Timely Manner ◽  
Content Type ◽  
Conservative Accounting ◽  
The Impact

Purpose The main purpose of this study is to investigate the effect of investor sentiment on accounting conservatism in listed companies in the Tehran Stock Exchange (TSE). Design/methodology/approach In this paper, two models of Ball and Shivakumar (2006) and Basu (1997) have been used for measuring conditional conservatism in accounting. To measure investor sentiment, the author uses the Baker and Wurgler (2006, 2007) index. The research sample consists of 1,820 observations and 182 firms listed on TSE over a ten-year period between 2011 and 2020. This study uses panel data and multivariate regression analysis to test it hypotheses. Findings Consistent with this hypothesis that accounting conservatism will increase with investor sentiment, the results showed that Iranian firms recognize economic losses and bad news in a more timely manner during high sentiment periods than during low sentiment periods. This implies that Iranian managers recognize economic losses and bad news in earnings in a more timely manner during periods of high investor sentiment. Practical implications This finding provides significant evidence for investors and financial reporting standard-setters in Iran because by removing accounting conservatism from the conceptual framework, managers are not able to present conservative financial reports, and this can intensify the negative impact of investors sentiment in the Iranian capital market. Managers of Iranian companies can reduce information asymmetry and increase capital market efficiency by accelerating the disclosure of bad news. Thus, managers can strategically recognize losses and prevent investors from making emotional decisions that reduce their wealth. Originality/value To the best of the authors’ knowledge, this is the first study to empirically examine the impact of investor sentiment on accounting conservatism in a developing market called Iran. This study contributes to the corporate disclosure literature. Also, the result of this study contributes to standard-setters of accounting standards to improve the mandatory disclosure literature on more conservative accounting earnings.

Investor Sentiment and Accounting Conservatism

2017 ◽  
Author(s):  
Rui Ge ◽  
Nicholas Seybert ◽  
Feida Zhang
Keyword(s):  
Investor Sentiment ◽  
Accounting Conservatism

scholarly journals IPO Underpiricing, Konservatisme Akuntansi, dan Sentimen Investor

2021 ◽  
Vol 20 (2) ◽  
pp. 145-156
Author(s):  
Buddi Wibowo ◽  
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Investor Sentiment ◽  
Secondary Market ◽  
Accounting Conservatism ◽  
Fair Price ◽  
Ipo Underpricing ◽  
Accrual Quality ◽  
Holding Period ◽  
Lack Of Information

Abstract. The significant increase of stock price compared to its IPO price is difficult to explain. Companies which issue their stock are impossible to set underpriced IPO voluntarily, while investors who buy an overpriced stock are only they who are not rational or lack of information. Conservative financial statements and high accrual quality provide an opportunity for all investors to be able to estimate the fair price of IPO shares so that the disagreement among investors is not too wide and price fluctuations due to speculation are not too high in the secondary market. Using Indonesia Stock Exchanges, the results show that influence of accounting conservatism and accrual quality are stronger in the 30 holding period after the IPO because the uncertainty of financial statement information led to wider speculation opportunities in the long period. The rise in stock prices after IPO is also influenced by investor’s sentiment and market conditions Keywords: IPO, underpricing, accounting conservatism; accrual quality, investor sentiment

Accounting conservatism and the cost of bank credit in Brazil

2013 ◽  
Vol 10 (1) ◽  
pp. 27-48 ◽  
Author(s):  
Giovani Antonio Silva Brito ◽  
Eliseu Martins
Keyword(s):  
Accounting Conservatism ◽  
Bank Credit ◽  
The Cost

The Effect of Underreaction and Overreaction of Firm Stocks to Firm Valuation: Data from the Indonesian Stock Exchange

2019 ◽  
Author(s):  
Yohanes Indrayono
Keyword(s):  
Behavioral Finance ◽  
Firm Value ◽  
Intangible Assets ◽  
Stock Exchange ◽  
Investor Sentiment ◽  
Firm Valuation ◽  
Good News ◽  
Industrial Sectors ◽  
Tangible Assets ◽  
Firm Profitability

<p>This study contributes to the on-going studies on behavioral finance by providing a case study on underreaction and overreaction of firm stocks to firm valuation. We use the Model of Investor Sentiment (Barberis et al., 2005) to evaluate underreaction and overreaction behavior and reflect on specific findings in the Indonesian market. The result of the study is most of the stocks in the Indonesian Stock Exchange are more overreaction to the news of firm financial statements. Firms on the industry with more intangible assets measure more overreaction than firms on industries with more tangible assets. For stocks with overreaction, the stock firm value is positively affected by a change in the total assets and profitability, but not by change of book value. The result concretized no evidence that firm stocks overreacted to the news more than underreacting. In stock industrial sectors, the financial institutions and wholesale industry stocks demonstrated remarkable overreactions. Nonetheless, automotive, building construction, food and beverage as well as cement evidenced more underreaction. For better return in financial markets, investors may buy stocks of the firm on industry with more tangible assets when there is no good news about the increasing firm profitability and sales; nonetheless, they should buy stocks of the firm on industry with more intangible assets when there is no lousy news about the increasing firm profitability and sales. </p>

METHODS ASSESSMENT QUALITY OF ACCOUNTING REPORTING AND MODELS OF THEIR MEASUREMENT

2020 ◽  
Vol 3 (3) ◽  
pp. 95-99
Author(s):  
E. H. ABU ◽  
Keyword(s):  
Internal Control ◽  
Stock Prices ◽  
Control Method ◽  
Financial Statements ◽  
Accounting Conservatism ◽  
Standardized Assessment ◽  
Accrual Quality ◽  
Indirect Measures

The article explores individual approaches used to measure and evaluate the quality of financial state-ments: standardized assessment, accrual-based models (accrual quality), Beneise models (M-Score), in-dexes - the internal control method and the degree of accounting conservatism. The reason for the great dependence on the use of indirect measures (proxies for the quality of financial statements or stock prices) is that some of the qualities of financial statements are unobservable.

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