scholarly journals Accounting Conservatism and Information Asymmetry: Evidence from Taiwan

2013 ◽  
Vol 6 (7) ◽  
Author(s):  
Juo-Lien Wang
Keyword(s):  
Information Asymmetry ◽  
Accounting Conservatism

scholarly journals Accounting Conservatism

2021 ◽  
Author(s):  
◽  
Zhe Wang
Keyword(s):  
Construct Validity ◽  
Information Asymmetry ◽  
Default Risk ◽  
Potential Benefit ◽  
Accounting Conservatism ◽  
Empirical Measures ◽  
The Third ◽  
Economic Rationale ◽  
Signalling Theory ◽  
Debt Market

<p>This thesis provides an in-depth examination of accounting conservatism, which is one of the oldest and most important principles of accounting (Sterling, 1967;Watts, 2003a). Two main questions relating to accounting conservatism are extensively studied in this thesis: (1) How to measure accounting conservatism? (2) Why do firms adopt accounting conservatism? This thesis consists of three main chapters that answer these two questions from  three different perspectives. The first chapter studies the existing empirical measures of accounting conservatism from a construct validity perspective and concludes that construct validity of the existing measures is mixed to low. The second chapter examines the validity and bias in the Basu (1997) measure of accounting conservatism - one of the most widely used measure of conservatism in the accounting literature. The second chapter shows, analytically and empirically, that the Basu (1997) measure is biased upwards by the default risk of a firm, and proposes a new measure of conservatism that is free from this bias. This new measure of conservatism is called the "Default-Adjusted-Basu" measure. The third chapter investigates the economic rationale for accounting conservatism, and proposes a signalling theory for accounting conservatism. In a debt market characterized by information asymmetry, a borrower firm's degree of conservatism can serve as a credible signal about that borrower firm's level of operating  risk to the lenders in the debt market. Thus, one potential benefit of accounting conservatism is that it can reduce the degree of information asymmetry in the debt market.</p>

The pricing of information asymmetry based on environmental uncertainty and accounting conservatism

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohsen Rashidi
Keyword(s):  
Information Asymmetry ◽  
Capital Market ◽  
Environmental Uncertainty ◽  
Positive Association ◽  
Accounting Conservatism ◽  
Research Information ◽  
Expected Return ◽  
Financial Reports ◽  
Content Type ◽  
The Relationship

PurposeThe purpose of this study is to investigate the information asymmetry pricing (relation between information asymmetry and expected return) based on environmental uncertainty and accounting conservatism.Design/methodology/approachThe current study applies panel regression method estimator to investigate the relationship between accounting conservatism, environmental uncertainty and information asymmetry pricing of 1,309 firm-year observations in Iran for the period 2008–2018.FindingsThe result indicated the negative relation between accounting conservation and information asymmetry pricing and documented a positive association between environmental uncertainty and information asymmetry pricing.Practical implicationsIn the present study, the weaknesses caused by the ambiguity of capital market efficiency in market performance-based statistical models are compensated and partially covered by quantifying the relationships and implementing models in each quintile. Results obtained from this study will aid policymakers to evaluate disclosure rules and firms to manage their information. The study is based on the corporate accounting and financial literature and examines behavioral changes in information and its effect on information asymmetry pricing that can be applied to investors, managers, standardization committees and legislators.Originality/valueThe risk of accounting information in the context of the capital market environment can be divided into two parts: a part that is ambiguous about the accuracy of this information and another part that is a distribution of information. Unlike other research, information asymmetry pricing has also been addressed with regard to the origin and distribution of information. This study also considers the effect of information asymmetry and market constraints by considering the ability of financial reports to transmit firm information.

scholarly journals Accounting Conservatism

2021 ◽  
Author(s):  
◽  
Zhe Wang
Keyword(s):  
Construct Validity ◽  
Information Asymmetry ◽  
Default Risk ◽  
Potential Benefit ◽  
Accounting Conservatism ◽  
Empirical Measures ◽  
The Third ◽  
Economic Rationale ◽  
Signalling Theory ◽  
Debt Market

<p>This thesis provides an in-depth examination of accounting conservatism, which is one of the oldest and most important principles of accounting (Sterling, 1967;Watts, 2003a). Two main questions relating to accounting conservatism are extensively studied in this thesis: (1) How to measure accounting conservatism? (2) Why do firms adopt accounting conservatism? This thesis consists of three main chapters that answer these two questions from  three different perspectives. The first chapter studies the existing empirical measures of accounting conservatism from a construct validity perspective and concludes that construct validity of the existing measures is mixed to low. The second chapter examines the validity and bias in the Basu (1997) measure of accounting conservatism - one of the most widely used measure of conservatism in the accounting literature. The second chapter shows, analytically and empirically, that the Basu (1997) measure is biased upwards by the default risk of a firm, and proposes a new measure of conservatism that is free from this bias. This new measure of conservatism is called the "Default-Adjusted-Basu" measure. The third chapter investigates the economic rationale for accounting conservatism, and proposes a signalling theory for accounting conservatism. In a debt market characterized by information asymmetry, a borrower firm's degree of conservatism can serve as a credible signal about that borrower firm's level of operating  risk to the lenders in the debt market. Thus, one potential benefit of accounting conservatism is that it can reduce the degree of information asymmetry in the debt market.</p>

scholarly journals PENGARUH KONSERVATISME TERHADAP ASIMETRI INFORMASI (STUDI EMPIRIS PADA PERUSAHAAN MANUFAKTUR DI BEI)

2019 ◽  
Vol 3 (2) ◽  
pp. 1
Author(s):  
Aida Yulia
Keyword(s):  
Information Asymmetry ◽  
Regression Coefficient ◽  
Stock Exchange ◽  
Accounting Conservatism ◽  
Annual Reports ◽  
Test Results ◽  
Research Model ◽  
Book Value ◽  
Asymmetry Of Information ◽  
Negative Effect

The purpose of this study was to determine the effect of accounting conservatism on information asymmetry in the annual reports of companies listed on the Indonesia Stock Exchange.Target population in this study is a manufacturing company listed on the Indonesia Stock Exchange (BEI) with year observations from 2009 to 2011 the number of companies by 23 companies.Of accounting conservatism measurements conducted on 23 companies, the population of the obtained results of all companies that meet more than one measurement assumptions of accounting conservatism with market value to book value ratio greater than 1, so that the company can be classified as a conservative company. From the test results it can be concluded that the regression coefficient of determinant (R2) value 0.240 indicates that accounting conservatism is able to affect the asymmetry of information in the annual reports of companies listed on the Indonesia Stock Exchange amounted to 24.0 percent and the remaining 76.0 percent is influenced by other variables outside of the research model. Piecemeal evidence suggests that accounting conservatism variable regression coefficient of -0.474, (β ≠ 0), meaning that in partial accounting conservatism and significant negative effect of the information asymmetry in the annual reports of companies listed on the Indonesia Stock Exchange. Refers to the requirement that the results of the study reject Ho and accept Ha.  Keywords: Accounting Conservatism and Information Asymmetry

Management Earnings Forecasts and Accounting Conservatism

2019 ◽  
pp. 0148558X1986543
Author(s):  
Bikki Jaggi ◽  
Hua Christine Xin ◽  
Joshua Ronen
Keyword(s):  
Information Asymmetry ◽  
Cost Of Capital ◽  
Earnings Forecasts ◽  
Legal Liability ◽  
Accounting Conservatism ◽  
Management Earnings Forecasts

In a recent paper, Hui, Matsunaga, and Morse have argued that managers may prefer using accounting conservatism instead of issuing management earnings forecasts (MFs) that may reduce information asymmetry and may lower firms’ potential legal liability. We argue in this article that accounting conservatism serves as a substitute only for informative forecasts, which are classified as cost of capital (COC) MFs, and it does not serve as a substitute for opportunistic (OPP) MFs and disclose or abstain (DOA) MFs that are required under 1933 Securities Exchange Act because both these types of MFs are used to achieve different objectives. Our findings confirm our claim that conservatism serves as a substitute for informative MFs only.

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