ABSTRACT
This chapter explains the techniques that may be used to measure differences in accounting systems. It shows how to measure the degree of difference or similarity in the accounting methods used, as measured by within-country and between-country concentration indices. The chapter also explains comparative studies of ‘conservatism’ as a link between market returns and the reported earnings of a company. Basu’s view of conservatism is based on the expectation that company earnings reflect bad news more quickly than good news. Research studies show that the rate of reaction of earnings to good news or bad news is different for common law countries compared to code law countries. Finally, the various ways of measuring disclosure are explained and research studies are reviewed, including comparative evaluation of voluntary disclosure against a checklist, using content analysis to compare the nature and quantities of disclosure, or analysing words and phrases to identify good news, bad news, and different tones of language used. Some researchers use manual analysis for depth of understanding, while others use computer-based analysis for more comprehensive data collection.
