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| Author: | Gassen, J. Fulbier, R.U. Sellhorn, T. |
| Title: | International differences in conditional conservatism - The role of unconditional conservatism and income smoothing |
| Journal: | European Accounting Review
2006 : VOL. 15:4, p. 527-564 |
| Index terms: | accounting theory earnings models |
| Freeterms: | accounting procedures |
| Language: | eng |
| Abstract: | This paper examines the determinants of conditional conservatism (here as: cond-cons.) and related earnings attributes (here as: erngs-attrs.) internationally: 1. based on panel data, it is explored whether competing erngs-attrs. such as unconditional conservatism (as: cons.) and income smoothing (as: inc-smthg.) affect cond-cons. and its international differences. It is found that these attributes (as: attrs.) are predictably correlated with cond-cons. 2. the question whether inc-smthg. and cond-cons. are two fundamentally different erngs-attrs. is examined. It is shown theoretically that both attrs. yield different erngs. distributions and that the motivations for producing erngs. possessing these attrs. differ. To test these predictions empirically, firm-specific time series measures of symmetric timeliness are calculated using a novel trigonometric measure based on the standard Basu (1997)-type regression. Using this cross-sectional data, it is tested whether cond-cons. and inc-smthg. differ. They are found to be only weakly correlated for a broad international sample. It is shown that inc-smthg. explains international differences in cond-cons. Cond-cons. increases with the importance of debt financing, while inc-smthg. increases with the importance of dividends. |
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