Distributional Forms of Financial Accounting Ratios: Pearson's and Johnson's Taxonomies¹

Article type: Research Article

Authors: Buckmaster, Dale^{a; *} | Saniga, Erwin^a

Affiliations: [a] College of Business and Economics, University of Delaware, Newark, Delaware 19716, USA

Correspondence: [*] Address all correspondence to: Dale Buckmaster, Department of Accounting, College of Business and Economics, University of Delaware, Newark, Delaware 19716, USA.

Note: [1] Authors are listed alphabetically.

Abstract: Knowledge of the cross-sectional distributional forms of financial accounting ratios can be important to users of accounting information. But previous studies of the cross-sectional distributional forms of accounting ratios have been limited to examining for normality. In this paper, the cross-sectional distributions of forty-one common financial accounting ratios are classified according to the Pearson and Johnson systems for each year of a ten-year period. Ninety-seven percent of the distributions are J-shaped, reverse J-shaped, skewed, or U-shaped. The vast majority of the distributions are bounded. Also, thirty-five of the forty-one ratios have distributions with the same general form for at least eight years of the ten-year period.

DOI: 10.3233/JEM-1990-16303

Journal: Journal of Economic and Social Measurement, vol. 16, no. 3, pp. 149-166, 1990