Topic:   The Information Role of Conditional and Unconditional Conservatism

Presenter：Xinrong Qiang, associate professor in accounting, IFAS

Time:  November 23, 2007（Friday）3：00—4：30 PM    

Venue: Room 513, Jiageng Bld 2

Chair： Yujun Wu, assistant professor in finance, IFAS

Abstract：

LaFond and Watts (2006) find that investors demand accounting conservatism in valuation because it reduces information asymmetry. This paper further examines whether conditional and unconditional conservatism play the same role in reducing information asymmetry and whether investors demand both in valuation. The results indicate that both types of conservatism are negatively associated with lead information asymmetry, suggesting that both can reduce information asymmetry. However, lag information asymmetry is positively

associated with conditional conservatism only, indicating that investors demand only conditional conservatism in valuation, not realizing the information role of unconditional conservatism.

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