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

Authors: Maha Khalifa; Hakim Ben Othman; Khaled Hussainey

Addresses: LIGUE-ISCAE, University of Manouba, 17 impasseBechChedly, Corniche, Bizerte 7000, Tunisia ' Tunis Business School, University of Tunis, Tunisia; Tunis Business School, LIGUE-ISCAE, University of Manouba, Office N°1-12, El mourouj 2074, Tunisia ' Plymouth Business School, University of Plymouth, 405 H Cookworthy Building, Plymouth, PL4 8AA, UK

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.

Keywords: accounting conservatism; conditional conservatism; loss frequency; cash flows; earnings variability; temporal variation; cross-sectional differences; emerging economies; firm size; market-to-book ratio; leverage; profitability; earnings; accruals components; asymmetric timeliness; C-score; common law countries; code law countries; regions; industries.

DOI: 10.1504/IJAAPE.2016.073887

International Journal of Accounting, Auditing and Performance Evaluation, 2016 Vol.12 No.1, pp.45 - 69

Received: 10 Jan 2014
Accepted: 25 Jul 2014

Published online: 29 Dec 2015 *

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