Measuring Accounting Asset Informativeness

Posted: 17 Jan 2019 Last revised: 7 Jun 2021

See all articles by Qi Chen

Qi Chen

Duke University - Fuqua School of Business

Katherine Schipper

Duke University - Fuqua School of Business

Ning Zhang

Queen's University, Smith School of Business

Date Written: January 14, 2019

Abstract

We develop and validate an empirical measure of the informativeness of accounting assets in measuring firm-specific economic capital, an important determinant of both cash flows and intrinsic values. Our validation tests show that the asset-informativeness measure is sensitive to differences in both accounting methods and implementation decisions at the firm level, and corresponds to the way equity investors use the information in accounting assets. We find that accounting assets contain substantial information about firms’ productive capacity (economic capital) and the information is not summarized in several earnings attributes often associated with earnings quality.

Keywords: Asset measurement; Asset informativeness; Economic capital

JEL Classification: M41, G14, G32

Suggested Citation

Chen, Qi and Schipper, Katherine and Zhang, Ning, Measuring Accounting Asset Informativeness (January 14, 2019). Available at SSRN: https://ssrn.com/abstract=3315505 or http://dx.doi.org/10.2139/ssrn.3315505

Qi Chen (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
(919) 660-7753 (Phone)

Katherine Schipper

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Ning Zhang

Queen's University, Smith School of Business ( email )

Kingston, Ontario K7L 3N6
Canada

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