Abstract

http://ssrn.com/abstract=1931732
 
 

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Accounting Conservatism and its Effects on Financial Reporting Quality: A Review of the Literature


George W. Ruch


University of Alabama - Culverhouse School of Accountancy

Gary K. Taylor


University of Alabama - Culverhouse College of Commerce & Business Administration

September 9, 2011


Abstract:     
We review and summarize the accounting literature examining the effects of accounting conservatism on financial reporting quality. Much of the empirical accounting research attempts to provide evidence relating to the effects of accounting conservatism on financial reporting quality. Financial reporting quality is measured through reported accounting numbers, capital market activity, contracting outcomes, and financial decisions. Accordingly, we summarize accounting conservatism research into three primary categories: (1) earnings quality, (2) capital markets, and (3) contracting efficiency. By summarizing the effects of accounting conservatism, we provide a mechanism to help assess the potential costs and benefits associated with accounting conservatism vis-à-vis financial reporting quality.

Number of Pages in PDF File: 87

Keywords: Accounting conservatism, financial reporting quality, earnings quality, market returns, contracting

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Date posted: September 22, 2011  

Suggested Citation

Ruch, George W. and Taylor, Gary K., Accounting Conservatism and its Effects on Financial Reporting Quality: A Review of the Literature (September 9, 2011). Available at SSRN: http://ssrn.com/abstract=1931732 or http://dx.doi.org/10.2139/ssrn.1931732

Contact Information

George W. Ruch
University of Alabama - Culverhouse School of Accountancy ( email )
Tuscaloosa, AL 35487
United States
Gary Kenneth Taylor (Contact Author)
University of Alabama - Culverhouse College of Commerce & Business Administration ( email )
Box 870223
Dept. of Accounting
Tuscaloosa, AL 35487-0223
United States
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