Conservatism in Accounting - Part I: Explanations and Implications

By Ross L. Watts. 2003

2,807 citations recorded by the source corpus.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/ce5b9d4406a2dce11b3a5d78fe2bcb773d29b703

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Citations in the corpus

The pricing of conservative accounting and the measurement of conservatism at the firm-year level (2010, background): “Watts (2003) argues that conditional conservatism should be positively correlated with asymmetric information in debt and equity contracts— which we proxy by firm leverage and return volatility, respectively.”
Association Between Borrower and Lender State Ownership and Accounting Conservatism (2010, positive): “Watts [2003] reasons that conservative accounting is an efficient debt contracting technology to address agency problems caused by lenders having asymmetric information and asymmetric payoffs.”
Identifying Conditional Conservatism (2006, background): “However, Watts (2003a), who emphasizes verifiability somewhat more and news dependence vs. independence somewhat less than Basu, does appear to find unconditional conservatism to be useful for contracting purposes.”
Managerial Ownership and Accounting Conservatism (2007, positive): “Watts (2003) proposes that conservative accounting helps address the issues of limited horizons and limited liability.”
International Differences in Conditional Conservatism – The Role of Unconditional Conservatism and Income Smoothing (2006, neutral): “3For an overview of related empirical work, refer to Watts (2003b).”
Stock price crash risk: review of the empirical literature (2018, positive): “Conditional conservatism, a desirable attribute of financial reporting (Basu, 1997; Watts 2003 a, b; Ball and Shivakumar, 2005) is one such constraint. Conservatively-audited earnings attenuate (accelerate) managerial incentives to release positive (negative), but unverifiable, information. Timely d”
The objectives of financial reporting: a historical survey and analysis (2013, neutral): “…characteristic’ and not as an element in the ‘objectives’, conservatism has been a controversial quality of accounting information for decades, and, as used in shareholder–manager agency situations, it has become an issue of increasing interest to academics (Watts 2003, Whittington 2008b, p. 499).”
The Economic Determinants of Conditional Conservatism (2009, positive): “Regarding taxation, the decrease in the net present value of tax payments that Watts (2003) puts forward as an explanation to why managers implement conservative accounting practices, can be achieved: (1) by delaying tax payments through unconditional conservatism, i.e., via the persistent…”
Board of Directors' Characteristics and Conditional Accounting Conservatism: Spanish Evidence (2007, background): “Watts (2003a) explains that, from the point of view of contracting and litigation risk, conservatism originates from the existence of (1) information asymmetries; (2) asymmetries in compensation contracts; (3) limited liability; and (4) the fact that the parties to the firm have different time-hor”
Asymmetric Timeliness of Earnings, Market-to-Book and Conservatism in Financial Reporting (2007, positive): “Instead, it is more concerned with the valuation and distribution of the firm’s resources and consequently, recognition of verifiable increases in those resources (Holthausen and Watts, 2001, and Watts, 2003a).”
An Experiment in Fair Value Accounting: UK Investment Vehicles (2008, background): “b) Some academics have expressed reservations over fair value accounting following the perceived misuse of fair value accounting in some recent American accounting scandals (Watts, 2003) and the role of accounting in boom periods (Penman, 2003).”