oa Journal of Economic and Financial Sciences - Long-run accounting conservatism and subsequent equity returns
|Article Title||Long-run accounting conservatism and subsequent equity returns|
|© Publisher:||University of Johannesburg|
|Journal||Journal of Economic and Financial Sciences|
|Affiliations||1 University of Pretoria|
|Publication Date||Apr 2016|
|Pages||60 - 75|
|Keyword(s)||Accounting conservatism, Financial crisis, Industry differences, Long-term returns and Three-factor model|
This paper investigates the impact of long-run accounting conservatism on subsequent equity returns. The accounting conservatism proxy used is based on prior research and considered for different possible specifications. In contrast to prior research, this study compensates for the impact of momentum and the accrual anomaly by using five-year subsequent buy and hold total returns. A three-factor Fama and French model finds that accounting conservatism does not have a significant impact on subsequent equity returns for a sample of US firms. Stratifying the sample into pre-crisis and crisis periods does not affect results. However, this study also reveals that firms within certain industries do benefit from increased accounting conservatism, during both pre-crisis and crisis sample periods.
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