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

See all articles by Henry Jarva

Henry Jarva

Aalto University - School of Business

Suman Lodh

Middlesex University

Monomita Nandy

Brunel University London

Hannu Ojala

Tampere University; Aalto University - School of Business

Date Written: May 11, 2020

Abstract

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

Jarva, Henry and Lodh, Suman and Nandy, Monomita and Ojala, Hannu, Conditional conservatism under mandatory IFRS around the world: An examination of institutional quality and Big 4 audits (May 11, 2020). Available at SSRN: https://ssrn.com/abstract=3505282 or http://dx.doi.org/10.2139/ssrn.3505282

Henry Jarva (Contact Author)

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076
Finland

Suman Lodh

Middlesex University ( email )

The Burroughs
London, NW4 4BT
United Kingdom

HOME PAGE: http://www.mdx.ac.uk/about-us/our-people/staff-directory/lodh-suman

Monomita Nandy

Brunel University London ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

Hannu Ojala

Tampere University ( email )

Tampere, FIN-33101
Finland

Aalto University - School of Business ( email )

P.O. Box 21210
Helsinki, 00101
Finland

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