Belief‐updating biases hinder the correction of inaccurate beliefs and lead to suboptimal decisions. We complement Rabin and Schrag's (1999) portable extension of the Bayesian model by including conservatism in addition to confirmatory bias. Additionally, we show how to identify these two...

We offer a novel explanation for the widespread decline in U.S. firms' reported book equity. We find that accounting conservatism is negatively associated with book equity, a result that is both economically and statistically significant, as well as robust to a variety of model specifications....

This study examines the recognition of deferred tax assets on tax loss carryforwards (TLCF-DTA) before and during the COVID-19 pandemic. We analyze a sample of large German firms from 2017-2021, hand-collecting deferred tax and management forecast data. The recognition behavior of the average...

Belief-updating biases hinder the correction of inaccurate beliefs and lead to suboptimal decisions. We complement Rabin and Schrag's (1999) portable extension of the Bayesian model by including conservatism in addition to confirmatory bias. Additionally, we show how to identify these two forms...