Temporal variation and cross-sectional differences of accounting conservatism in emerging countries
by Maha Khalifa; Hakim Ben Othman; Khaled Hussainey
International Journal of Accounting, Auditing and Performance Evaluation (IJAAPE), Vol. 12, No. 1, 2016

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 2000-2012. 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 2007-2012. In addition, we find significant differences in accounting conservatism between common-law and code-law countries, across regions and industries.

Online publication date:: Tue, 29-Dec-2015

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