Earnings quality in UK private firms: comparative loss recognition timeliness

Ray Ball ^[1] ; Lakshmanan Shivakumar ^[2]
1. [1] University of Chicago
  
  University of Chicago
  
  City of Chicago, Estados Unidos
2. [2] London Business School
  
  London Business School
  
  Reino Unido
Localización: Journal of accounting and economics, ISSN 0165-4101, Vol. 39, Nº. 1, 2005, págs. 83-128
Idioma: inglés
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Resumen
- UK private and public companies face substantially equivalent regulation on auditing, accounting standards and taxes. We hypothesize that private company financial reporting nevertheless is of lower quality due to different market demand, regulation notwithstanding. A large UK sample supports this hypothesis. Quality is operationalized using Basu's (1997) time-series measure of timely loss recognition and a new accruals-based method. The result is not affected by controls for size, leverage, industry membership and auditor size, or by allowing endogenous listing choice. The result enhances understanding of private companies, which are predominant in the economy. It also provides insight into the economics of accounting standards.