Financial reporting incentives for conservative accounting: The influence of legal and political institutions

Financial reporting incentives for conservative accounting: The influence of legal and political... This paper explores financial reporting incentives created by an economy's institutional structure. The underlying premise of our analysis is that a country's legal/judicial system, securities laws, and political economy create incentives that influence the behavior of corporate executives, investors, regulators and other market participants. Further, such incentives ultimately shape the properties of reported accounting numbers. We empirically analyze relations between key characteristics of country-level institutions and the asymmetric recognition of economic gains and losses into earnings (i.e., conditional conservatism). We also provide evidence on channels through which specific institutions manifest their influence on observed conservatism. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Financial reporting incentives for conservative accounting: The influence of legal and political institutions

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Publisher
Elsevier
Copyright
Copyright © 2006 Elsevier B.V.
ISSN
0165-4101
DOI
10.1016/j.jacceco.2005.10.005
Publisher site
See Article on Publisher Site

Abstract

This paper explores financial reporting incentives created by an economy's institutional structure. The underlying premise of our analysis is that a country's legal/judicial system, securities laws, and political economy create incentives that influence the behavior of corporate executives, investors, regulators and other market participants. Further, such incentives ultimately shape the properties of reported accounting numbers. We empirically analyze relations between key characteristics of country-level institutions and the asymmetric recognition of economic gains and losses into earnings (i.e., conditional conservatism). We also provide evidence on channels through which specific institutions manifest their influence on observed conservatism.

Journal

Journal of Accounting and EconomicsElsevier

Published: Oct 1, 2006

References

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