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Business Strategy, Accounting Conservatism and Performance

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  • Han Li

Abstract

This research consists with prior business strategy typology and accounting conservatism theories. It investigates the joint effect of business strategy and accounting conservatism on the firm’s financial performance. The paper finds that accounting conservatism as a prudent accounting reporting principle plays an important corporate governance mechanism. The conservatism can mitigate the negative effect of the aggressive business strategy. The joint effect between business strategy and accounting conservatism is positively related with financial performance. The result is robustness when the different measurements of the strategy and the conservatism are applied. When the firm has weak internal control quality, the joint effect on financial performance also exists significantly.

Suggested Citation

  • Han Li, 2020. "Business Strategy, Accounting Conservatism and Performance," Accounting and Finance Research, Sciedu Press, vol. 9(2), pages 1-23, May.
    • Handle: RePEc:jfr:afr111:v:9:y:2020:i:2:p:23
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    References listed on IDEAS

    as
    1. Hsieh, Chia-Chun & Ma, Zhiming & Novoselov, Kirill E., 2019. "Accounting conservatism, business strategy, and ambiguity," Accounting, Organizations and Society, Elsevier, vol. 74(C), pages 41-55.
    2. Basu, Sudipta, 1997. "The conservatism principle and the asymmetric timeliness of earnings," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 3-37, December.
    3. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2011. "Capital Allocation and Timely Accounting Recognition of Economic Losses," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 38(1-2), pages 1-33, January.
    4. Givoly, Dan & Hayn, Carla, 2000. "The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative?," Journal of Accounting and Economics, Elsevier, vol. 29(3), pages 287-320, June.
    5. Sun, Yan & Xu, Weihong, 2012. "The role of accounting conservatism in management forecast bias," Journal of Contemporary Accounting and Economics, Elsevier, vol. 8(2), pages 64-77.
    6. García Lara, Juan Manuel & García Osma, Beatriz & Penalva, Fernando, 2016. "Accounting conservatism and firm investment efficiency," Journal of Accounting and Economics, Elsevier, vol. 61(1), pages 221-238.
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    Cited by:

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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