Conditional Conservatism in U.S. High- and Low- Technology Firms

38 Pages Posted: 16 Jan 2014

See all articles by Mariem Khalifa

Mariem Khalifa


Samir Trabelsi

Brock University - Accounting

Hamadi Matoussi

University of Manouba - Gestion

Date Written: January 14, 2014


In this study, we investigate whether U.S. high-technology firms are more or less conditionally conservative relative to low-technology firms. If U.S. high-tech firms are required to expense immediately all R&D costs according to the accounting standard SFAS 2, which reflects unconditional conservatism, then in case of bad news (conditional conservatism), these firms cannot write-off their R&D costs. We expect that high-tech firms are less conditionally conservative since unconditional conservatism dampens the timeliness of accounting income. Our findings are consistent with the prediction that high-technology firms are less conditionally conservative than low-technology firms. The level of conditional conservatism increases with the level of leverage regardless of the technology level of the firm. Only low-technology firms are more conditionally conservative when they face higher auditor litigation risk. We find that neither in high-technology firms nor in low-technology firms, taxation affects conditional conservatism.

Keywords: Conditional conservatism; High-technology; Low-technology; Contracting; Litigation risk; Taxation.

JEL Classification: C23; L63; L65; L86; L96; M41;O51

Suggested Citation

Khalifa, Mariem and Trabelsi, Samir and Matoussi, Hamadi, Conditional Conservatism in U.S. High- and Low- Technology Firms (January 14, 2014). 2014 Canadian Academic Accounting Association (CAAA) Annual Conference. Available at SSRN: or

Mariem Khalifa

Independent ( email )

No Address Available

Samir Trabelsi (Contact Author)

Brock University - Accounting ( email )

St. Catharines, Ontario L2S 3A1

Hamadi Matoussi

University of Manouba - Gestion ( email )

Campus Universitaire de la Manouba
Manouba 2010, 2010
216-71-600 705 (Phone)
216-71-602 404 (Fax)

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