Measures of Accounting Conservatism: A Construct Validity Perspective

Journal of Accounting Literature, Forthcoming

61 Pages Posted: 29 Sep 2008 Last revised: 20 May 2011

See all articles by Richard Zhe Wang

Richard Zhe Wang

Eastern Illinois University

Ciaran Ó Hogartaigh

University College Dublin (UCD) - College of Business and Law

Tony van Zijl

Victoria University of Wellington - Faculty of Commerce and Administration

Date Written: September 25, 2008

Abstract

Accounting conservatism has been the subject of intensive empirical research in the past decade. To date five key measures of conservatism have emerged in the literature. However, there have been few studies that have examined, directly or tangentially, whether the applications of these measures produce facts or artefacts. In this paper we consider this issue from the perspective of construct validity. We describe each of the five measures and, within the constraints imposed by the limited and mixed relevant evidence, we consider the measures against four of the sub-validities of construct validity. While the available evidence is insufficient to conclude on construct validity, the analysis of this paper nevertheless suggests that the construct validity of the five existing measures of conservatism is weak. We conclude the paper with a consideration of the challenges of measuring conservatism facing accounting researchers and suggestions for further research.

Keywords: accounting conservatism, measurement, construct validity

JEL Classification: M41, M44

Suggested Citation

Wang, Richard Zhe and Ó Hogartaigh, Ciaran and van Zijl, Tony, Measures of Accounting Conservatism: A Construct Validity Perspective (September 25, 2008). Journal of Accounting Literature, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1274044

Richard Zhe Wang (Contact Author)

Eastern Illinois University ( email )

Charleston, IL 61920-3099
United States

Ciaran Ó Hogartaigh

University College Dublin (UCD) - College of Business and Law ( email )

Dublin
Ireland
+353-1-7164856 (Phone)

Tony Van Zijl

Victoria University of Wellington - Faculty of Commerce and Administration ( email )

RH 606, Pipitea Campus, 6th Floor, Rutherford Hous
23 Lambton Quay
Wellington
Australia

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