Accounting conservatism, business strategy, and ambiguity

Hsieh, Chia‐Chun; Ma, Zhiming; Novoselov, Kirill E.

doi:10.1016/j.aos.2018.08.001

Cited by 34 publications

(35 citation statements)

References 73 publications

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“…This means that by increasing uncertainty, the level of conservatism in accounting and financial reporting increases, which is consistent with previous studies (Bu et al, 2019;Dai and Ngo, 2020;Kanagaretnam et al, 2014;Lobo and Zhou, 2006). Further, the positive relationship between the level of conservatism and prospector strategy is in line with Hsieh et al (2019) study. Their study argued that prospector companies experience explosive growth in income as they invest a considerable amount of money in research and development.…”

Section: Discussionsupporting

confidence: 91%

“…In the word of Hsieh et al (2019), alert companies perceive all changes in business environments to identify issues as soon as they arise. Such alertness enables them to have sufficient time to assess the possible consequences of the issues and the company's resources to deal with them.…”

Section: Background and Hypotheses Developmentmentioning

confidence: 99%

“…Bu et al (2019) observed that political uncertainty is considerably related to reducing conservatism in accounting. Hsieh et al (2019) examined whether conservatism in accounting and financial reporting can be interpreted as a logical answer to uncertainty. Their study's results indicated that companies facing greater uncertainty are adopting more conservative accounting methods.…”

Section: Accounting Conservatism and Uncertaintymentioning

confidence: 99%

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Accounting conservatism and uncertainty in business environments; using financial data of listed companies in the Tehran stock exchange

Hejranijamil

Shekarkhah

2020

AJAR

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PurposeApplying conservatism to the preparation of financial statements has been considered not only as a natural mechanism to protect the interests of the stockholders but also as a practical way to assist managers to deal with uncertainty in business environments. This study aimed to determine if increasing uncertainty can lead to raising the level of conservatism used in preparing financial statements. The result of the study could provide a better understanding of the factors that influence the level of applying conservative methods in accounting and financial reporting.Design/methodology/approachThe model introduced by Basu (1997) was used to measure accounting conservatism. Business strategy and alertness were considered as two proxies for classifying companies according to their level of uncertainty. By adding each proxy of uncertainty to the model and using the financial data of 183 companies for five years (from 2013 to 2018), the multiple regression models were estimated through EViews. It was assumed that inert companies and those with prospector strategy face a higher level of uncertainty. Consequently, they were expected to report their financial status conservatively.FindingsFindings revealed that companies, which adopted a prospector strategy, applied more conservative methods in their financial reports. This indicated that facing wider uncertainty results in reporting more conservatively, which could not be said about inert companies.Originality/valueThe current research is the first research undertaken in a developing country such as Iran, and the study's results may benefit other developing countries.

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Section: Discussionsupporting

confidence: 91%

Section: Background and Hypotheses Developmentmentioning

confidence: 99%

Section: Accounting Conservatism and Uncertaintymentioning

confidence: 99%

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Accounting conservatism and uncertainty in business environments; using financial data of listed companies in the Tehran stock exchange

Hejranijamil

Shekarkhah

2020

AJAR

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“…It also helps the board to screen out investments with negative NPV and highly risky positive NPV. Hsieh, Ma, & Novoselov (2019) submitted that conservative strategy is expedient when business is faced with ambiguity. Han (2020) opined that conservatism as a corporate governance mechanism can alleviate any inherent drawbacks in a firm's business strategy.…”

Section: Conservative Business Strategy Board Independence and Performancementioning

confidence: 99%

Conservative Business Strategy as Moderator of Board Independence and Corporate Performance Nexus in Nigerian Financial Companies

Osazevbaru

2021

Asian Economic and Financial Review

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This paper adds to prior literature by investigating the strength of conservative business strategy in the relationship between board independence and firm performance. The application of an analytical framework that enhances the simultaneous analysis of interrelated dependency contributes to the expansion of the methodological scaffold for analyzing institutional characteristics of emerging markets.

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“…The first method is the summation of general and sales-related costs and R&D costs. By following the study of [29] R&D cost is equal to zero if data are not obtainable about this variable. The discussion about each proxy is as below:…”

Section: Proxy For Remmentioning

confidence: 99%

Is there any association between real earnings management and crash risk of stock price during uncertainty? An evidence from family-owned firms in an emerging economy

2020

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This research work intends to analyze the association between real earnings manipulation and stock price crash. Further, we also analyze the spillover outcome of the crash as a result of applying real earnings management. It is hypothesized that there is a positive and statistically significant association between real activities manipulation and crash risk. It is also assumed that this spillover outcome is more noticeable during uncertainty. By applying data of family firms for the time period 2005–2018, empirical results provide the proof that real manipulation has a significant impact on stock crash for a developing economy like Pakistan among family-based companies. This research work also gives a statistical insight that spillover outcome is more notable for firms facing uncertainty. Our statistical estimations are in support of the assumed hypotheses of the study. This study has very significant and practical implications for academic researchers, standard setters, and investors.

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Accounting conservatism, business strategy, and ambiguity

Cited by 34 publications

References 73 publications

Accounting conservatism and uncertainty in business environments; using financial data of listed companies in the Tehran stock exchange

Accounting conservatism and uncertainty in business environments; using financial data of listed companies in the Tehran stock exchange

Conservative Business Strategy as Moderator of Board Independence and Corporate Performance Nexus in Nigerian Financial Companies

Is there any association between real earnings management and crash risk of stock price during uncertainty? An evidence from family-owned firms in an emerging economy

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