TY - JOUR
T1 - Market effects of recognition and disclosure
AU - Barth, Mary E.
AU - Clinch, Greg
AU - Shibano, Toshi
PY - 2003/9/1
Y1 - 2003/9/1
N2 - Our recognition and disclosure model reveals that price informativeness is determined by the interaction of the qualities of three information sources - The recognized amount, the disclosed information, and the information revealed by price - And accounting expertise acquisition. It also reveals that recognition of an accounting amount alters each of these, thereby affecting price informativeness. Perhaps surprisingly, we find that recognition of a highly unreliable accounting amount, rather than simply disclosing it, can result in greater price informativeness. Likewise, recognition of a highly reliable amount can result in lower price informativeness. Our findings suggest that, because of the effects of aggregation, basing recognition decisions on reliability alone is too simplistic. Reliability relative to relevance is key, not reliability per se. We also find that recognition and disclosure affect the coefficients in a regression of price on accounting amounts.
AB - Our recognition and disclosure model reveals that price informativeness is determined by the interaction of the qualities of three information sources - The recognized amount, the disclosed information, and the information revealed by price - And accounting expertise acquisition. It also reveals that recognition of an accounting amount alters each of these, thereby affecting price informativeness. Perhaps surprisingly, we find that recognition of a highly unreliable accounting amount, rather than simply disclosing it, can result in greater price informativeness. Likewise, recognition of a highly reliable amount can result in lower price informativeness. Our findings suggest that, because of the effects of aggregation, basing recognition decisions on reliability alone is too simplistic. Reliability relative to relevance is key, not reliability per se. We also find that recognition and disclosure affect the coefficients in a regression of price on accounting amounts.
UR - http://www.scopus.com/inward/record.url?scp=0042475410&partnerID=8YFLogxK
U2 - 10.1111/1475-679X.00117
DO - 10.1111/1475-679X.00117
M3 - Article
AN - SCOPUS:0042475410
SN - 0021-8456
VL - 41
SP - 581
EP - 609
JO - Journal of Accounting Research
JF - Journal of Accounting Research
IS - 4
ER -