Conditional conservatism under mandatory IFRS around the world: An examination of institutional quality and Big 4 audits
55 Pages Posted: 8 Jan 2020 Last revised: 12 May 2020
Date Written: May 11, 2020
Using a large sample of firms that report under mandatory IFRS from 51 countries, this study examines the association between conditional conservatism, institutional quality, and Big 4 audits. We hypothesize and find that the degree of conditional conservatism is higher in countries with better institutional quality. In contrast to popular belief, we provide evidence that Big 4 audits are not associated with the degree of conditional conservatism. Finally, we show that reporting differences between high and low institutional countries have not diminished over time. Thus, our findings suggest that the implementation of IFRS remains predictably uneven. These findings have implications for investors, standard-setting bodies, and corporate governance.
Keywords: asymmetric timeliness, Big 4 versus non-Big 4 audit quality, conditional conservatism, international accounting, reporting quality
JEL Classification: F30, G15, M41, M42
Suggested Citation: Suggested Citation