회계보수성이 미래이익의 정보효과에 미치는 영향

We examine the effect of conservatism on future earnings' information effect(Future Earnings Response Coefficient, hereafter ‘FERC’). Since current return is determined by unexpected current earnings, the cumulative change in expectations about future earnings and noise, it may have a systematic relationship with the level of accounting conservatism. Basu(1997) defines conservatism as “the accountant’s tendency to require a higher degree of verification to recognize good news as gains than to recognize bad news as losses”. Although the role of conservatism is useful, conservatism is still at debate. On one hand, the majority of the literature posits that the primary role of conservatism is creditor protection. And conservatism plays a role in enhancing the earnings predictability and quality of accounting information. In addition, the high level of conservatism is a mechanism that constrains managers to reduce the opportunistic behavior. So accounting conservatism has been widely used in practice. On the other hand, according to Paek and Lee(2004) and Moon et al.(2006), since the high level of conservatism in the calculation of earnings requires more verifiability in recognizing gains than in recognizing losses, distorts revenue-expense matching. Accordingly the high level of conservatism diminish persistence and value relevance. Specifically, this brings about the undervaluation of the short-term return on investment, and, at the same time, comes to have the potential to report a better result of the firms in a long-term perspective(Moon et al. 2006). After all, conservatism has a positive impact, such as protect creditors and constrain managers to reduce the opportunistic behavior, but investor undervalues earnings in conservatism since investors can't recognize the long and short-term effects of the conservative accounting. In this study, We argue how investors recognize conservatism and how conservatism affects informativeness about future earnings. This study is to extend the prior studies is to investigate for the information content of conservatism. We refer to this association as the FERC. FERC model examines how much information about future earnings if reflected in the change in current stock price. Paek and Lee(2004) are investigate the relationship between current return and current earnings in conservative accounting. However, return-earning model exhibit low explanatory power and earning's lack of timeliness is a contributor to the low contemporaneous return-earnings association. According to Collins et al.(1994) and Tucker and Zarowin(2006), FERC model is superior to estimate the direct relation between a firm’s future earnings and its current and past earnings for these reasons. First, although realized earnings are often used to directly predict future earnings, the earnings information can be indirectly used by investors in earnings predictions when investors combine it with information from other sources. Second, the change in (expected) future earnings may be due to a shock that has no effect on current earnings. Such information will not be captured by current earnings, but will be impounded in current stock price. We empirically tests how investors recognize conservatism and whether the earnings in conservative accounting affect informativeness about future earnings. Using two different measures of the conservatism and the model of Tucker and Zarowin(2006), we find that the changes in the current stock price of high level of conservatism contains less information about their future earnings. In addition we re-examine additional test on the relationship between conservatism and FERC, the results of the additional test report the changes in the current stock price of high level of conservatism contains less information about their future earnings. Thus, investors undervalue earnings in conservative accounting since investors can't recognize the long and short-term effects of the conservative accounting. The results in our study contributes the level of conservatism and FERC by providing empirical evidence on the effect of conservatism on future earnings' information effect. Especially, this study implies that not only undervaluation of the short-term return in conservative accounting but also long-term perspective affect investor's reaction.