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Reporting bias in incomplete information model

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  • Peat, Maurice
  • Svec, Jiri
  • Wang, Jue

Abstract

Company financial reports are likely to be systematically biased. In this paper, we extend the Duffie and Lando (2001) model with a skewness correction which can account for both random and directional components of reporting noise.

Suggested Citation

  • Peat, Maurice & Svec, Jiri & Wang, Jue, 2014. "Reporting bias in incomplete information model," Economics Letters, Elsevier, vol. 123(1), pages 45-49.
    • Handle: RePEc:eee:ecolet:v:123:y:2014:i:1:p:45-49
    DOI: 10.1016/j.econlet.2014.01.021
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    References listed on IDEAS

    as
    1. Duffie, Darrell & Lando, David, 2001. "Term Structures of Credit Spreads with Incomplete Accounting Information," Econometrica, Econometric Society, vol. 69(3), pages 633-664, May.
    2. Basu, Sudipta, 1997. "The conservatism principle and the asymmetric timeliness of earnings," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 3-37, December.
    3. Hyun Song Shin, 2003. "Disclosures and Asset Returns," Econometrica, Econometric Society, vol. 71(1), pages 105-133, January.
    4. Yu, Fan, 2005. "Accounting transparency and the term structure of credit spreads," Journal of Financial Economics, Elsevier, vol. 75(1), pages 53-84, January.
    5. Zhang, Xiao-Jun, 2000. "Conservative accounting and equity valuation," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 125-149, February.
    6. Verrecchia, Robert E., 1983. "Discretionary disclosure," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 179-194, April.
    7. Baruch Lev, 2003. "Corporate Earnings: Facts and Fiction," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 27-50, Spring.
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    Cited by:

    1. Douadia Bougherara & Laurent Piet, 2018. "On the role of probability weighting on WTP for crop insurance with and without yield skewness," Working Papers hal-02790605, HAL.
    2. Lyubov Y. Matich, 2017. "Roadmaps as a Tool for Modeling Complex Systems," HSE Working papers WP BRP 73/STI/2017, National Research University Higher School of Economics.

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    More about this item

    Keywords

    Credit risk; Incomplete information; Reporting bias; Skew normal;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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