PurposeThe purpose of this paper is to investigate the economic consequences of different dimensions of accounting conservatism: ex ante (balance sheet or unconditional) conservatism and ex post (earnings or conditional) conservatism. It is argued that the two dimensions of conservatism convey different information to the market about the quality of accounting numbers and have different associations with equity investors' required rates of return.Design/methodology/approachThe cost of equity capital estimates are based on the Ohlson and Juettner‐Nauroth model. The paper applies a regression model to examine the relationship between the cost of equity capital and accounting conservatism controlling for other risk factors.FindingsThe findings indicate that ex ante conservatism is associated with higher quality of accounting information and lower costs of equity capital and that ex post conservatism is associated with lower quality of accounting information and higher costs of equity capital.Research limitations/implicationsThe firm‐level conservatism measures may suffer from measurement error. Future studies can be more specific in determining proxies for ex ante and ex post conservatism.Practical implicationsThe results imply that conservative accounting signals information to investors about the quality of a firm's current and future earnings. Investors' required rates of returns may be higher for conservative reporting firms that are more susceptible to opportunistic management discretion.Originality/valueThe paper provides the first UK evidence on the effect of different dimensions of conservatism on equity investors' required rates of return.

Purpose -This study aims to investigate the association between the intellectual capital disclosure level and the mandatory adoption of international financial reporting standards (IFRS). This paper reports an empirical evidence for the impact of the mandatory adoption of IFRS on the disclosure level of intellectual capital, intangible and knowledge assets. Intellectual capital is categorized into process focus, customer focus, human focus, research and development focus. The linkages between intellectual capital and IFRS adoption are investigated in companies of high technology sector in the UK. A novel approach to measure the effect of the IFRS adoption on intellectual capital disclosure level is presented. Design/methodology/approach -The proposed measure was adopted from the information retrieval algorithm and intellectual capital framework. The empirical model was expanded from the econometric model. The primary data for investigating the interrelationships between intellectual capital and IFRS adopting were hand collected from London Stock Exchange and listed firms' web sites. A comprehensive intellectual capital, intangible assets, and knowledge assets' dictionary were built based on related literature. Findings -This study reports that the overall accuracy of information retrieval application is up to 78.2 percent. The disclosures of intellectual capital items are closely associated with the IFRS adoption. The results suggest that in older or larger companies, the intellectual capital disclosures increase in the post-adoption period. Overall, the results confirm that companies in the high-tech industry are associated with a higher disclosure level following the mandatory adoption of IFRS. Originality/value -The adaption of information retrieval technique and intellectual capital framework enhances the understanding of the usefulness and readability of annual reports in the post-adoption period of IFRS in high-tech industry. This study corroborates and complements those of extant research and sheds light on the effect of IFRS adoption on voluntary disclosures. These findings will enable top management around the world to realize the impact of the IFRS adoption on intellectual capital elements so that long-term strategic knowledge assets management may be emphasized for sustainable competitive edge.

Prior research shows that family firms have better earnings quality than non-family firms in common-law countries and highly developed markets. In contrast, we do not find a significant difference in the financial reporting quality between family and non-family firms in the context of a civil-law system and less developed market. We show that the financial reporting quality of family firms is conditioned on: (1) the divergence between the controlling shareholders' voting rights and their cash flow rights, and (2) the firm's reputation for integrity, while these two conditions do not explain the restatement likelihood for non-family firms. Moreover, when accounting irregularities are detected in the case of family firms, they are associated with more serious accounting restatements. Together, these results imply that the severity of the conflict between ultimate and minority shareholders, and a lack of integrity, explain the propensity for making financial restatements among family firms in a regime characterized as having weak investor protection and concentrated ownership structures.

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