Does the effect of conservatism on value relevance of earnings vary according to the growth opportunities? Case of the Tunisian firms
by Ichraf Ben Flah, Mohamed Ali Omri
International Journal of Technology, Policy and Management (IJTPM), Vol. 11, No. 1, 2011

Abstract: Conservatism is a convention inherent to any accounting system. However, the application of this principle can move the accounting image away from the economic reality of the firm, in particular, when the latter is subject to future positive events. The objective of this paper is to investigate, in the Tunisian context, the impact of conservatism on the value relevance of the earnings as related to whether the firm is characterised or not by a future path of growth. We thus contribute, on the one hand, to the new approach of research in value relevance literature that takes into consideration some factors which have a considerable influence on the relation between accounting figures and firm value; on the other hand, we extend the empirical value relevance literature in emerging markets that remains very uncommon. The results of the study prove that the effect of conservatism on the relevance degree of earnings increases with growth potential of the firm.

Online publication date: Tue, 31-Mar-2015

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