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Conditional conservatism and value relevance of financial reporting: A study in view of converging accounting standards

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  • Pierre Thijssen, Maximiliaan Willem
  • Iatridis, George Emmanuel

Abstract

This study examines the relationship between conditional conservatism and value relevance in the EU and US. Specifically, it investigates whether this relationship differs under US GAAP and IFRS compliance. In addition, this study examines the trend in value relevance, conditional conservatism and accrual conservatism. In total, 20.930 firm-year observations from 2009 to 2015 are extracted from the ORBIS database. Using pooled OLS regressions, this study concludes the following. First, a significant positive relationship between conservatism via accruals and value relevance. Second, a significant negative relationship between timelier recognition of losses and value relevance. Third, accounting standards do not provide significant explanatory power given different levels of conditional conservatism. Lastly, this study provides evidence that conditional conservatism is increasing and value relevance is decreasing.

Suggested Citation

  • Pierre Thijssen, Maximiliaan Willem & Iatridis, George Emmanuel, 2016. "Conditional conservatism and value relevance of financial reporting: A study in view of converging accounting standards," Journal of Multinational Financial Management, Elsevier, vol. 37, pages 48-70.
    • Handle: RePEc:eee:mulfin:v:37-38:y:2016:i::p:48-70
    DOI: 10.1016/j.mulfin.2016.10.001
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    More about this item

    Keywords

    Accounting standards; Value relevance; Conservatism; Reported accounting information;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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