Fundamentals of Accounting Losses

Posted: 25 Aug 2005

See all articles by April Klein

April Klein

New York University (NYU) - Department of Accounting

Carol A. Marquardt

City University of New York (CUNY) – Baruch College

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This paper examines accounting and non-accounting factors behind accounting losses over a fifty-year period. Using multivariate time-series analysis, we report evidence that the annual percentage of losses for U.S. firms is significantly related to accounting conservatism, Compustat coverage of small firms, real firm performance as measured by cash flows from operations, and business cycle factors. We further find that non-accounting factors tend to play the dominant role in explaining accounting losses over our sample period. Our results are robust to alternative definitions of macroeconomic productivity, as well as to varying model specifications. Our findings contribute to the literature on accounting losses and accounting conservatism and have implications for the use of accounting loss information in numerous settings.

Keywords: Accounting losses, accounting conservatism, business cycle, small firms

JEL Classification: M41, M49, G12

Suggested Citation

Klein, April and Marquardt, Carol, Fundamentals of Accounting Losses. The Accounting Review, January 2006, Available at SSRN:

April Klein (Contact Author)

New York University (NYU) - Department of Accounting ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012
United States

Carol Marquardt

City University of New York (CUNY) – Baruch College ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3241 (Phone)

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