Business Commons^™

Does The Presence Of Foreign Investors Affect Financial Reporting Quality In Philippine Publicly Listed Firms?, Natasha Amber Y. Cabiltes, Megan Justine Siao Beltran, John Miguel Roger Dela Cruz Benito, Gianna Zenovia Domingo Agaton, Mariel Monica R. Sauler, Angelo A. Unite

Angelo King Institute for Economic and Business Studies (AKI)

Reinstate accounting conservatism in the Conceptual Framework – Our findings should be of interest to accounting standard setters, given the ongoing debate on the necessity for accounting conservatism as a characteristic for useful financial statements after its initial removal from the conceptual framework in 2010. While there are arguments that conservatism violates the neutrality of financial reports, further discussions show that conservatism can give a more faithful representation of firm performance (Cooper, 2015; International Accounting Standards Board, 2018).

Support For Workfare And Labor Programs In The Bahamas: The Role Of Subjective Poverty, Insecurity, Conservatism, And Empathy., Utha Butler

FIU Electronic Theses and Dissertations

This research extends the literature on individual-level determinants of workfare and labor programs support (WLPs) using a mixed factors model to explain individual behavior. Extant research focused on institutional factors, which did not sufficiently explain much of the variance. This study, conducted primarily online and through mobile applications in The Bahamas, focused on the individual-level determinants that may explain support for such programs. This research revealed that conservatism, empathy, and government spending efficacy contextualized as goal achievement are significant predictors. We found that support for social spending in this context was affected by whether the respondent was a direct beneficiary …

Unfaithful Representation: Understating Accounts Receivable In The Name Of Conservatism, Timothy G. Bryan

Faculty Submissions

This research empirically examines the relationship between conservatism in accounting and the allowance for doubtful accounts. A sample of companies’ financial data related to the allowance for doubtful accounts and bad debt expense in the chemical and allied products manufacturers industry, SIC 28, for the period from 2005 through 2017 was obtained. The results of analysis of this data indicate that the allowance for doubtful accounts is overstated in these firms and has become more overstated since 2004. This research is important as few have researched the allowance for doubtful accounts, and that research has not considered the allowance for …

Ceo Political Ideology And Mergers And Acquisitions Decisions, Ahmed M. Elnahas, Kim Dongnyoung

EKU Faculty and Staff Scholarship

We examine the relation between CEOs political ideology and their firms' investment decisions, particularly their M&A decisions. Employing individual financial contributions data for the period from 1993 to 2006, we find that firm's investment decisions vary with CEO's political ideology. Our evidence indicates that Republican CEOs are less likely to engage in M&A activities. When they do undertake acquisitions, they are more likely to use cash as the method of payment, and their targets are more likely to be public firms and to be from the same industry. Further, Republican CEOs tend to avoid high information asymmetry acquisitions that involve …

Ceo Overconfidence And Stock Price Crash Risk, Jeong-Bon Kim, Zhang Wen, Liandong Zhang

Research Collection School Of Accountancy

This study examines the association between chief executive officer (CEO) overconfidence and future stock price crash risk. Overconfident managers overestimate the returns to their investment projects and misperceive negative net present value (NPV) projects as value creating. They also tend to ignore or explain away privately observed negative feedback. As a result, negative NPV projects are kept for too long and their bad performance accumulates, which can lead to stock price crashes. Using a large sample of firms for the period 1993–2010, we find that firms with overconfident CEOs have higher stock price crash risk than firms with nonoverconfident CEOs. …

Client Conservatism And Auditor-Client Contracting, Mark L. Defond, Chee Yeow Lim, Yoonseok Zang

Research Collection School Of Accountancy

We find that auditors of more conservative clients charge lower fees, issue fewer going concern opinions, and resign less frequently, consistent with more conservative clients imposing less engagement risk on their auditors. Using path analysis, we find evidence that both inherent risk and auditor business risk explain these associations. Also consistent with conservatism reducing auditor business risk, we find that client conservatism is associated with fewer lawsuits against auditors and with fewer client restatements. Taken together, our results are consistent with auditors viewing client conservatism as an important determinant of engagement risk that, in turn, affects auditor-client contracting decisions. Our …

Conservatism And Equity Ownership Of The Founding Family, Shuping Chen, Xia Chen, Qiang Cheng

Research Collection School Of Accountancy

We investigate the impact of founding family ownership on accounting conservatism. Family ownership is characterised by large, under-diversified equity stake and long investment horizon. These features give family owners both the incentives and the ability to implement conservative financial reporting to reduce legal liability and mitigate agency conflicts with other stakeholders. Since CEOs can have different incentives towards conservatism, we focus on ownership of non-CEO founding family members in our investigation. We find that conservatism increases with non-CEO family ownership, supporting our prediction. This relationship becomes insignificant in family firms with founders serving as CEOs, either due to founder CEOs' …

Bank Accounting Conservatism And Bank Loan Pricing, Chu Yeong Lim, Edward Lee, Asad Kausar, Martin Walker

Research Collection School Of Accountancy

This paper studies the effects of bank accounting conservatism on the pricing of syndicated bank loans. We provide evidence that banks timelier in loss recognition charge higher spreads. We go onto consider what happens to the relationship between spreads and timeliness in loss recognition during the financial crisis. During the crisis, banks timelier in loss recognition increase their spreads to a lesser extent than banks less timely in loss recognition. These findings are broadly consistent with the argument that conditional accounting conservatism serves a governance role. The policy implication is that banks timelier in loss recognition exhibit more prudent and …

The Relationship Between Board Skills And Conservatism: Malaysian Evidence, Rahimah Yunos, George Smith, Zubaidah Ismail

Research outputs 2012

This study seeks to examine the influence of board skill, multiple directorships (BSHIP), and tenure of independent directors on accounting conservatism, as measured by asymmetric timeliness and accrual-based conservatism (CONACCR). Fixed-effect regression models were constructed on a sample of 2016 firm-year observations for asymmetric timeliness model and 2033 firm-year observations for CONACCR model, which covered from 2001 to 2007. The findings show that the degree of financial expertise on the board is positively associated with the recognition of bad news which is relative to good news into earnings. BSHIP appears to have no effect on conservatism. Independent directors who have …

Internal Controls And Conditional Conservatism, Beng Wee Goh, Dan Li

Research Collection School Of Accountancy

This study examines the relation between internal controls and conditional conservatism (“conservatism”), also referred to as timely loss recognition. Using a sample of firms that disclose material weaknesses (MWs) in internal controls under the Sarbanes-Oxley Act (SOX), we find a positive relation between internal control quality and conservatism. Specifically, firms with MWs exhibit lower conservatism than firms without such weaknesses. Further, firms that disclose MWs and subsequently remediate these weaknesses exhibit greater conservatism than firms that continue to have MWs. Overall, these results are consistent with strong internal controls acting as a mechanism that facilitates conservatism. Our study contributes to …

The Influence Of Foreign Operations And Their Disclosure On Earnings Quality, Sixian Yang, Fang Hu, Don Giacomino

Accounting Faculty Research and Publications

This paper investigates the influence of foreign operations and their financial disclosure on earnings quality in terms of accounting conservatism (timely recognizing losses). In a large (7,311 corporate years) sample of U.S. corporations, we find earnings of firms with multinational operations (MNCs) tend to be of lower quality and are reported less conservatively than those without foreign operations (domestic firms). Further, by looking at the geographic segment information disclosed by MNCs, we find that earnings conservatism gets improved if a MNC reports “clean” segment information of foreign operations; wherein operating results of MNC are broken down by geographic regions (continent …

Conditional Conservatism In Accounting: New Measure And Tests Of Determinants, Giorgio Gotti

Financial Services Forum Publications

Following Basu’s (1995, 1997) seminal work, accounting literature adopted the Basu coefficient to measure conditional conservatism (among others, Ball et al. 2003; Ball et al. 2000; Ball et al. 2005; Ball and Shivakumar 2005; Lobo and Zhou 2006; Chandra et al. 2004). However, Basu’s choice of proxy for measuring the arrival of good/bad news, stock returns, introduces inaccuracy in the measure of conditional conservatism (Dietrich et al. 2007; Roychowdhury and Watts 2007; Givoly et al. 2007).

To address the problem, I introduce a new measure of conditional conservatism, which results from a Least Absolute Deviation (LAD) piecewise regression and adopts …

Decision Making Under Conflicting Criteria In Pension Valuations: An Expected Utility Model, Lisa Lipowski Posey, Arnold F. Shapiro

Journal of Actuarial Practice (1993-2006)

Many of the criteria used by actuaries when selecting assumptions for pension plan valuations often conflict. As a result, actuaries must weigh the various costs and benefits associated with a particular set of assumptions. We use expected utility theory to model the process of chOOSing actuarial assumptions when faced with potentially conflicting criteria. The three criteria considered are prudence, best estimate, and conservatism. The actual contribution chosen by the actuary is found to depend on the contribution level that triggers a red flag with respect to tax deductibility. If this level is relatively low, the actuary chooses a high contribution …