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Firm Type and Unconditional Conservatism: The Indian Experience with IFRS Convergence

Author

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  • Basu, Debarati

    (Shiv Nadar University)

Abstract

This paper investigates how private and public firms vary with respect to unconditional conservatism in financial reporting in the pre and post IFRS worlds. I consider unconditional conservatism (UC) which pre-empts the more commonly studied conditional conservatism, private firms that are differently regulated, IFRS convergence instead of the more uniform IFRS adoption and an emerging market. Using a large Indian sample of 63,000 observations across more than 15,500 firms (~41% are private) over 10 years (2011-2020), I show that private firms are less unconditionally conservative than public firms. Also, contrary to literature, IFRS convergence increases conservatism in India and reduces the conservatism gap between private and public firms. These results hold even after controlling for monitoring, governance, and group-affiliation. This adds significantly to our understanding of how the effect of uniform accounting standards on reporting choices of different firm types varies significantly by and within a context and region.

Suggested Citation

  • Basu, Debarati, 2024. "Firm Type and Unconditional Conservatism: The Indian Experience with IFRS Convergence," American Business Review, Pompea College of Business, University of New Haven, vol. 27(1), pages 221-243, May.
    • Handle: RePEc:ris:ambsrv:0102
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    File URL: https://digitalcommons.newhaven.edu/americanbusinessreview/vol27/iss1/8/
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    More about this item

    Keywords

    Financial Reporting Quality; Private Firms; Accounting Regulation; Emerging Markets; Information Asymmetry; Concentrated Ownership;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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