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The Role of Accounting Conservatism in Financial Reporting in Reducing the Practice of Earnings Management in Jordanian Extractive Companies

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  • Dr. Omar Fareed Shaqqour

    (Zarqa University, Zarqa, Jordan)

Abstract

This study examines the relationship between the accounting conservatism and earnings management, and the role of the accounting conservatism in reducing the practice of earnings management. Accounting conservatism was measured using the ratio of the total accrueds to the gross profit, and earnings management was measured by (Modified Jones model, 1996). Sample of the study included all extractive companies listed on the Amman Stock Exchange, which have data in the Amman Stock Exchange during the study period (2010-2014). The Results of the study showed that the level of accounting conservatism in the extractive companies listed on the ASE was low, in percentage 33%, and the results showed that the percentage of the degree of earnings management was 37%, the study concluded that threr were a negative relationship between the level of conservatism accounting in financial reporting in the extractive companies listed on the Amman Stock Exchange and the degree of earnings management practice. The researcher recommended increasing interest in the concept of accounting conservatism, and define investors the importance of this concept and the negative effects they will face in the case of non-application this concept in the financial reporting.

Suggested Citation

  • Dr. Omar Fareed Shaqqour, 2016. "The Role of Accounting Conservatism in Financial Reporting in Reducing the Practice of Earnings Management in Jordanian Extractive Companies," Journal of Business & Management (COES&RJ-JBM), , vol. 4(3), pages 93-109, July.
    • Handle: RePEc:jso:coejbm:v:4:y:2016:i:3:p:110-129
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    References listed on IDEAS

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    2. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
    3. Basu, Sudipta, 1997. "The conservatism principle and the asymmetric timeliness of earnings," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 3-37, December.
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