TITLE:
Accounting Conservatism: Evidence from Indian Markets
AUTHORS:
Sushma Vishnani, Dheeraj Misra
KEYWORDS:
Conservatism, Accounting Conservatism, Conditional Conservatism
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.5,
September
21,
2016
ABSTRACT: This paper establishes existence of conditional
conservatism in accounting practices of Indian corporate. It estimates
firm-year measure of accounting conservatism (C-score). This study validates
the C-score, asymmetric timeliness measure, and establishes monotonicity of
C-scores. The paper also focuses on the study of the empirical properties of
C-score and finds positive association of C-score decile ranks with decile wise
Leverage and Variability. The C-score decile ranking is negatively associated
with Size, Age, Market-to-Book Value ratio, Return on Assets and Non-Operating
Accruals. Through this study, the forecasting capability of C-scores is
established. C-scores can predict conditional conservatism up to two years
ahead. This study is expected to play an important role in furtherance of
research in this area in the Indian context.