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Temporal variation and cross-sectional differences of accounting conservatism in emerging countries

Temporal variation and cross-sectional differences of accounting conservatism in emerging countries Prior research finds that accounting conservatism has increased over time in developed countries. In this paper, we examine the time-series extent and shift of accounting conservatism in emerging countries over the period 2000­2012. We also analyse differences in conservatism level across countries, regions, legal regimes and industries. In addition, we examine the impact of size, market-to-book and leverage on the degree of conservatism at firm level. We use a set of measures to assess the degree of conservatism. These include changing time-series properties of profitability, earnings, cash flows, accruals components, asymmetric timeliness, Market-to-Book ratio and Khan and Watts' (2009) C-score. We find that the degree of conservatism declined during the period between 2000 and 2007 and increased over the period 2007­2012. In addition, we find significant differences in accounting conservatism between common-law and code-law countries, across regions and industries. Keywords: accounting conservatism; conditional conservatism; loss frequency; cash-flows; earnings variability. Copyright © 2016 Inderscience Enterprises Ltd. M. Khalifa et al. Reference to this paper should be made as follows: Khalifa, M., Ben Othman, H. and Hussainey, K. (2016) `Temporal variation and cross-sectional differences of accounting conservatism in emerging countries', Int. J. Accounting, Auditing and Performance Evaluation, Vol. 12, No. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Accounting, Auditing and Performance Evaluation Inderscience Publishers

Temporal variation and cross-sectional differences of accounting conservatism in emerging countries

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Publisher
Inderscience Publishers
Copyright
Copyright © 2016 Inderscience Enterprises Ltd.
ISSN
1740-8008
eISSN
1740-8016
DOI
10.1504/IJAAPE.2016.073887
Publisher site
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Abstract

Prior research finds that accounting conservatism has increased over time in developed countries. In this paper, we examine the time-series extent and shift of accounting conservatism in emerging countries over the period 2000­2012. We also analyse differences in conservatism level across countries, regions, legal regimes and industries. In addition, we examine the impact of size, market-to-book and leverage on the degree of conservatism at firm level. We use a set of measures to assess the degree of conservatism. These include changing time-series properties of profitability, earnings, cash flows, accruals components, asymmetric timeliness, Market-to-Book ratio and Khan and Watts' (2009) C-score. We find that the degree of conservatism declined during the period between 2000 and 2007 and increased over the period 2007­2012. In addition, we find significant differences in accounting conservatism between common-law and code-law countries, across regions and industries. Keywords: accounting conservatism; conditional conservatism; loss frequency; cash-flows; earnings variability. Copyright © 2016 Inderscience Enterprises Ltd. M. Khalifa et al. Reference to this paper should be made as follows: Khalifa, M., Ben Othman, H. and Hussainey, K. (2016) `Temporal variation and cross-sectional differences of accounting conservatism in emerging countries', Int. J. Accounting, Auditing and Performance Evaluation, Vol. 12, No.

Journal

International Journal of Accounting, Auditing and Performance Evaluation – Inderscience Publishers

Published: Jan 1, 2016

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