The Effect of Non-Accounting Factors on Accounting Losses

Abstract

 The focus of this paper is examining the fundamentals of accounting losses. Specifically, the paper examines the effect of non-accounting factors on accounting losses for listed firms in the ASE. Non-accounting factors such as size, the length of the operating cycle and actual performance are more relevant in valuing loss firms. The paper finds that small size firms, long operating cycles and actual (real) performance explain losses for listed firms in the ASE. The results suggest that these non-accounting factors play a dominant role for valuing firms reporting losses. The paper concludes that investors must recognize the underlying reasons of losses before discarding loss firms as an investment alternative.