On the Value Relevance of Asymmetric Financial Reporting Policies

<heading id="h1" level="1" implicit="yes" format="display">ABSTRACT</heading>This paper considers an overlapping generations model where investors trade in a firm's stock. Investment risk is partly determined by the volatility of the stock price at which current investors can sell their shares to the next generation of investors. It is shown that asymmetric reporting of good and bad news is value relevant as it affects the allocation of risk among future generations of shareholders. Copyright (c), University of Chicago on behalf of the Institute of Professional Accounting, 2008.