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 analyze differences in conservatism level across countries, regions, legal regimes and industries. We also examine the impact of size, Market-to-Book and leverage on the degree of conservatism. 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 is 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.