Review of Accounting Studies

, Volume 13, Issue 2, pp 168-205

First online:

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

  • Ray BallAffiliated withGraduate School of Business, University of Chicago
  • , Ashok RobinAffiliated withCollege of Business, Rochester Institute of Technology
  • , Gil SadkaAffiliated withColumbia Business School, Columbia University Email author 

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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) R 2, 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 quality Association studies Debt Conservatism Timeliness International

JEL Classifications

F30 G15 G18 G32 K33 M41