Conditional Conservatism and the Value Relevance of Accounting Earnings: An International Study
AbstractUsing a sample consisting of firms from 20 countries, we investigate whether conditional conservatism affects the value relevance of accounting earnings. We find that the association of conditional conservatism with the value relevance of accounting earnings depends on the country-specific level of accrual intensity. That is, in countries with higher accrual intensity, conditional conservatism is positively associated with the value relevance of earnings. We find that this effect is incremental to that of shareholder protection on the value relevance of accounting earnings documented in Hung (Journal of Accounting and Economics, 30, pp. 401-420, 2001). The results are consistent with conditional conservatism serving as an efficient contracting role to reduce managers' opportunistic behavior in the use of accruals. However, our results also indicate that the benefits of conditional conservatism are contextual and are lost in countries with lower accrual intensity.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal European Accounting Review.
Volume (Year): 15 (2006)
Issue (Month): 4 ()
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Web page: http://www.tandfonline.com/REAR20
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- Rahimah Mohamed Yunos Author_Email: email@example.com & Malcolm Smith & Zubaidah Ismail & Syahrul Ahmar Ahmad, 2011. "Inside Concentrated Owners, Board Of Directors And Accounting Conservatism," Annual Summit on Business and Entrepreneurial Studies (ASBES 2011) Proceeding 2011-053-178, Conference Master Resources.
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