56th Seminar on Finance and Accounting

Topic:   The Information Role of Conditional and Unconditional Conservatism

 

PresenterXinrong Qiang, associate professor in accounting, IFAS

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Time:  November 23, 2007(Friday)300430 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.

 

Download: paper