Title: Does accounting conservatism measure what it is required to measure? An empirical study of construct validity perspective

Authors: Saif-Ur-Rehman Khan; Azlan Ali; Misbah Sadiq

Addresses: College of Business, University of Modern Sciences, Dubai, United Arab Emirates ' Business School, Universiti Kuala Lumpur, Malaysia ' Faculty of Management (FM), 81310 UTM Skudai, Johor, Malaysia

Abstract: Accounting conservatism principle plays an important role in producing fair view of financial statements and has appeared as one of the most prominent research topics over the last 15 years. This mechanism relies significantly on conservatism proxies, but there remain considerable differences of opinion regarding their ability to accurately measure the degree of conservatism. To address this issue, the current study uses a sample of Malaysian listed firms for the period 2002 to 2011. Findings indicate that three of the seven conservatism proxies exhibit higher degrees of construct validity. This in itself is an important conclusion that three alternative proxies can be considered substitutes among themselves.

Keywords: accounting conservatism; conservatism proxies; construct validity; Malaysia; fair view; financial statements.

DOI: 10.1504/AAJFA.2015.067830

Afro-Asian Journal of Finance and Accounting, 2015 Vol.5 No.1, pp.70 - 98

Received: 15 Feb 2014
Accepted: 22 Oct 2014
Published online: 18 Mar 2015 *

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