Review of Accounting Studies

, Volume 13, Issue 2, pp 168–205

Is financial reporting shaped by equity markets or by debt markets? An international study of timeliness and conservatism


DOI: 10.1007/s11142-007-9064-x

Cite this article as:
Ball, R., Robin, A. & Sadka, G. Rev Acc Stud (2008) 13: 168. doi:10.1007/s11142-007-9064-x


We hypothesize debt markets—not equity markets—are the primary influence on “association” metrics studied since Ball and Brown (1968 J Account Res 6:159–178). Debt markets demand high scores on timeliness, conservatism and Lev’s (1989 J Account Res 27(supplement):153–192) R2, because debt covenants utilize reported numbers. Equity markets do not rate financial reporting consistently with these metrics, because (among other things) they control for the total information incorporated in prices. Single-country studies shed little light on debt versus equity influences, in part because within-country firms operate under a homogeneous reporting regime. International data are consistent with our hypothesis. This is a fundamental issue in accounting.


Reporting qualityAssociation studiesDebtConservatismTimelinessInternational

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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Graduate School of BusinessUniversity of ChicagoChicagoUSA
  2. 2.College of BusinessRochester Institute of TechnologyRochesterUSA
  3. 3.Columbia Business SchoolColumbia UniversityNew YorkUSA