Ownership Type, IFRS Adoption and Unconditional Conservatism

24 Pages Posted: 23 Feb 2021

See all articles by Debarati Basu

Debarati Basu

XLRI - Xavier School of Management

Date Written: December 1, 2021


Purpose: The purpose of this study is to investigate how private and public firms vary with respect to unconditional conservatism levels in financial reporting. The study also examines whether adoption of international accounting standards affects the association between conservatism and organizational form.

Design/methodology/approach: This study uses a large Indian sample of almost 63,000 firm-year observations across more than 15,500 firms (~41% of which are private firms) over 10 years (2011-2020) with multivariate regressions.

Findings: The study shows that private firms are less unconditionally conservative than public firms. Also, contrary to extant literature, adoption of international accounting studies increases conservatism for all firms in the context under study. However, the newer standards moderate and reduce the conservatism gap between private and public firms. These results hold even after controlling for monitoring, governance, and group affiliation.

Originality/value: To the best of my knowledge, this is the first study that explores unconditional conservatism across private and public firms in an emerging market context which is very different from the developed world. This adds significantly to our understanding of how organization type impacts financial reporting. Within this framework, the study of different accounting standards also helps show that the effect of IFRS-like standards on reporting choices varies significantly by context and region.

Keywords: Unconditional conservatism; Financial reporting quality; Private firms; Emerging markets; IFRS

JEL Classification: L33, M41, M48, G32, G34

Suggested Citation

Basu, Debarati, Ownership Type, IFRS Adoption and Unconditional Conservatism (December 1, 2021). Available at SSRN: https://ssrn.com/abstract=3787874 or http://dx.doi.org/10.2139/ssrn.3787874

Debarati Basu (Contact Author)

XLRI - Xavier School of Management ( email )

C H Area (E), Jamshedpur, Jharkhand

HOME PAGE: http://https://acad.xlri.ac.in/facprofile/index.php?701

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