Corporate Governance Attributes and Accounting Conservatism: Evidence from China

Pasko, Oleh; Chen, Fuli; Birchenko, Nataliia; Ryzhikova, Natalia

doi:10.2478/sbe-2021-0053

Cited by 7 publications

(5 citation statements)

References 39 publications

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“…However, they observe that CC is not significantly changed in both periods. Considering the impact of convergence with IFRS and corporate governance on AC in China, Pasko et al (2021) find a decline in AC after China’s convergence with IFRS. In addition, they document a negative relationship between AC and some corporate governance attributes.…”

Section: Literature Review On Accounting Regulation and Accounting Co...mentioning

confidence: 96%

“…Specifically, some studies document a positive relationship between China's 2006 AR and CC (Liu et al, 2016;Barhamzaid, 2019). On the other hand, other studies document a negative relationship between the two variables (Hou et al, 2014;Bradford et al, 2017;Li et al, 2018;Cheng, 2019;Pasko et al, 2021). Meanwhile, Isaboke and Chen (2019) document no significant effect of China's 2006 AR on CC.…”

Section: Literature Review On Accounting Regulation and Accounting Co...mentioning

confidence: 99%

“…Notably, some researchers argue that China’s 2006 AR widely adopts fair value accounting (FVA) (Hou et al , 2014; Bradford et al , 2017; Li et al , 2018; Cheng, 2019; Pasko et al , 2021). Accordingly, they suggest that GNs recognition is expected to be increased as FVA recognizes gains and losses in a timely fashion (Barker and McGeachin, 2015).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…In this concern, some scholars document a positive relationship between China’s 2006 AR and CC (Liu et al , 2016; Barhamzaid, 2019). On the other hand, other researchers document an opposite view (Hou et al , 2014; Bradford et al , 2017; Li et al , 2018; Cheng, 2019; Pasko et al , 2021). In the meanwhile, Isaboke and Chen (2019) document no connection between the two variables.…”

Section: Introductionmentioning

confidence: 98%

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The role of accounting regulation on good news recognition and conditional conservatism: evidence from China’s 2006 accounting regulation

Barhamzaid¹

2023

ARJ

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Purpose This study aims to investigate the impact of accounting regulation (AR) on good news (GNs) recognition and conditional conservatism (CC), using the Chinese experiment in the 2006 AR. Design/methodology/approach The current study applies the Basu (1997) model to a sample of 26,755 firm-year observations from 1997 to 2017. Findings The study finds that GNs recognition is significantly reduced and becomes significantly less than bad news recognition under China’s 2006 AR, suggesting that CC is enhanced under China’s 2006 AR. Research limitations/implications This paper excludes the financial sector from the sample. Thus, generalizing results on the financial sector is not appropriate. In addition, the available literature on this topic is limited as it deals with convergence with IFRS, not the full adoption of IFRS. Practical implications The study findings are expected to benefit policymakers and accounting standard setters in controlling GNs recognition and CC as well. Originality/value Whereas prior studies on this topic report their results on CC only, without considering the role of AR on GNs recognition, this paper highlights the role of AR on both GNs recognition and CC as well.

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Section: Literature Review On Accounting Regulation and Accounting Co...mentioning

confidence: 96%

Section: Literature Review On Accounting Regulation and Accounting Co...mentioning

confidence: 99%

Section: Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 98%

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The role of accounting regulation on good news recognition and conditional conservatism: evidence from China’s 2006 accounting regulation

Barhamzaid¹

2023

ARJ

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“…Theoretically, the core tenet of good financial reporting revolves around providing impartial and precise information. Nonetheless, many studies demonstrate that conservative accounting yields enhanced financial information for stakeholders (Watts, 2003(Watts, , 2006Ahmed & Duellman, 2007;Nguyen et al, 2020;Oleh, 2021). Accounting conservatism is the propensity to promptly reflect negative news compared to positive news (Basu, 1997), thereby reducing anticipated losses for investors operating under asymmetrical loss functions.…”

Section: Introductionmentioning

confidence: 99%

Corporate governance report compliance rate and accounting conservatism: New evidence from Korea

Seok Choo,

Cho,

Emilia Lee

2024

Investment Management and Financial Innovations

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This study investigates the relationship between the corporate governance report (CGR) compliance rate and a company’s accounting conservatism, utilizing the CGR compliance rate as a novel method to evaluate the effectiveness of corporate governance practices. Given the challenges of applying global indices to measure corporate governance in the Korean market, this study focuses on the CGR compliance rate as a key indicator. Utilizing the ordinary least squares (OLS) regression model, specifically the Ball and Shivakumar (2005) model widely employed in previous studies to assess accounting conservatism, this paper conducts empirical analyses based on 784 observations from Korean listed firms between 2018 and 2021. The main analysis reveals a positive association between the CGR compliance rates (coef = –2.416, p-value &lt; 0.01) and accounting conservatism. A fixed-effect model and a propensity score matching (PSM) model also show a positive association between the CGR compliance rates, respectively (coef = –2.507, p-value &lt; 0.01; coef = –3.118, p-value &lt; 0.1) and accounting conservatism. This study proves that firms with high CGR compliance rates tend to promptly recognize financial losses in financial reporting, thereby safeguarding investors. This suggests that investors should consider the CGR compliance rates when evaluating potential investments. Overall, these findings contribute to validating the CGR compliance rates as a valuable proxy for assessing corporate governance practices in Korean firms.

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Solving the choice puzzle: Financial and non-financial stakeholders preferences in corporate disclosures

Pasko,

Zhang,

Oriekhova

et al. 2023

Investment Management and Financial Innovations

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The paper delves into the relationship between accounting conservatism, valued by financial stakeholders, and corporate social performance (CSP), esteemed by non-financial stakeholders. This study assesses the potential impact of financial reporting practices, specifically accounting conservatism, on a firm’s CSP activities, which has significant implications for diverse stakeholders. Employing an accrual-based proxy for accounting conservatism and the social contribution value per share from the Shanghai Stock Exchange as a proxy for CSP, the study utilizes a sample of 25,490 year-company observations of A-share listed companies on China’s Shanghai and Shenzhen stock exchanges spanning from 2008 to 2019. Empirical findings indicate a negative correlation between accounting conservatism and CSP. The study suggests that higher levels of social performance are associated with reduced conservatism in financial reporting, indicating that firms prioritize CSP over the interests of financial stakeholders by adopting less conservative financial reporting policies. Aligned with agency theory, these results underscore that socially responsible firms are less inclined to employ accounting conservatism in reporting earnings. This study establishes a connection between firms’ unconventional and less traditional activities, such as CSP, and conservative financial reporting, offering valuable insights for investors, analysts, and regulators. AcknowledgmentThis paper is co-funded by the European Union through the European Education and Culture Executive Agency (EACEA) within the project “Embracing EU corporate social responsibility: challenges and opportunities of business-society bonds transformation in Ukraine” – 101094100 – EECORE – ERASMUS-JMO-2022-HEI-TCH-RSCH-UA-IBA / ERASMUS-JMO-2022-HEI-TCHRSCH https://eecore.snau.edu.ua/

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Corporate Governance Attributes and Accounting Conservatism: Evidence from China

Cited by 7 publications

References 39 publications

The role of accounting regulation on good news recognition and conditional conservatism: evidence from China’s 2006 accounting regulation

The role of accounting regulation on good news recognition and conditional conservatism: evidence from China’s 2006 accounting regulation

Corporate governance report compliance rate and accounting conservatism: New evidence from Korea

Solving the choice puzzle: Financial and non-financial stakeholders preferences in corporate disclosures

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