Value Relevance of Conservative and Non-Conservative Accounting Information

The International Journal of Accounting, Volume 44, pp. 219-238, 2009

Posted: 21 Jul 2016

See all articles by Dimitrios V Kousenidis

Dimitrios V Kousenidis

Aristotle University of Thessaloniki - Law, Economic and Political Sciences; Aristotle University of Thessaloniki

Anestis Ladas

University of Macedonia - Accounting and Finance

Christos Negakis

University of Macedonia

Date Written: 2009

Abstract

The present paper examines effects of reporting conservatism on the value relevance of accounting earnings of a sample of Greek firms over the period from 1989 to 2003. The results of the paper indicate that conservatism is a salient feature of the Greek Accounting System. Moreover, the results depict that the level of conservatism has increased after the market crisis of 1999, potentially as a result of the additional regulation, imposed by the market authorities during the post-crisis period. Finally, the results show that there is a non-linear association between conservative reporting and value relevance of earnings. In particular, value relevance increases when moving from low-conservative firms to medium-conservative firms and decreases when moving further to high-conservative firms. Overall, the results of the paper lend empirical support to the theoretical underpinnings of Watts (2003a) who, on the one hand, report a number of arguments in favor of conservatism but, on the other hand, questions the practice of excessive conservative reporting as being a potential cause of the distortion of the earnings-returns relation.

Keywords: Conditional Conservatism, Value Relevance of Accounting Earnings, Cross-Sectional Dependence

JEL Classification: M41, G12

Suggested Citation

Kousenidis, Dimitrios V and Kousenidis, Dimitrios V and Ladas, Anestis and Negakis, Christos, Value Relevance of Conservative and Non-Conservative Accounting Information (2009). The International Journal of Accounting, Volume 44, pp. 219-238, 2009, Available at SSRN: https://ssrn.com/abstract=2812314

Dimitrios V Kousenidis

Aristotle University of Thessaloniki - Law, Economic and Political Sciences ( email )

School of Economics and Political Sciences
Department of Economics
Thessaloniki, 54124
Greece

Aristotle University of Thessaloniki ( email )

School of Economics and Political Sciences
Department of Economics
Thessaloniki, 54124
Greece

Anestis Ladas

University of Macedonia - Accounting and Finance ( email )

156 Egnatia Str.
Thessaloniki, 54006
Greece

Christos Negakis (Contact Author)

University of Macedonia ( email )

156 Egnatia St.
P.O. 1591
Thessaloniki, 54006
Greece

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