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Does accounting conservatism measure what it is required to measure? An empirical study of construct validity perspective

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  • Saif-Ur-Rehman Khan
  • Azlan Ali
  • Misbah Sadiq

Abstract

Accounting conservatism principle plays an important role in producing fair view of financial statements and has appeared as one of the most prominent research topics over the last 15 years. This mechanism relies significantly on conservatism proxies, but there remain considerable differences of opinion regarding their ability to accurately measure the degree of conservatism. To address this issue, the current study uses a sample of Malaysian listed firms for the period 2002 to 2011. Findings indicate that three of the seven conservatism proxies exhibit higher degrees of construct validity. This in itself is an important conclusion that three alternative proxies can be considered substitutes among themselves.

Suggested Citation

  • Saif-Ur-Rehman Khan & Azlan Ali & Misbah Sadiq, 2015. "Does accounting conservatism measure what it is required to measure? An empirical study of construct validity perspective," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 5(1), pages 70-98.
    • Handle: RePEc:ids:afasfa:v:5:y:2015:i:1:p:70-98
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