Differences In Conservatism Research Articles

States' racial resentment correlates with administrative distancing and lower rates of health plan selection in affordable care act marketplaces: a cross sectional analysis.

In the United States, the Affordable Care Act (ACA) pursued equity in healthcare access and treatment, but ACA implementation varied, especially limiting African Americans' gains. Marketplaces for subsidized purchase of coverage were sometimes implemented with limited outreach and enrollment assistance efforts. Reflecting state's ACA receptivity or reluctance, state's implementation may rest on sociopolitical stances and racial sentiments. Some states were unwilling to provide publicly supported healthcare to nonelderly, non-disabled adults- "the undeserving poor" -who evoke anti-black stereotypes. The present study assessed whether some states shunned Affordable Care Act (ACA) marketplaces and implemented them less vigorously than other states, leading to fewer eligible persons selecting insurance plans. It assessed if states' actions were motivated by racial resentment, because states connote marketplaces to be government assistance for unworthy African Americans. Using marketplace and plan selection data from 2015, we rated states' marketplace structures along a four-level continuum indicating greater acceptance of marketplaces, ranging from states assuming sole responsibility to minimal responsibility. Using national data from a four-question modern racism scale, state-wide racial resentment estimates were estimated at the state level. Analysis assessed associations between state levels of racial resentment with states' marketplace structure. Further analysis assessed relationships between both state levels of racial resentment and states' marketplace structure with states' consumer plan selection rates-representing the proportion of persons eligible to enroll in insurance plans who selected a plan. Racial resentment was greater in states with less responsibility for the administration of the marketplaces than actively participating states. States higher in racial resentment also showed lower rates of plan selection, pointing to less commitment to implementing marketplace provisions and fulfilling the ACA's coverage-improvement mission. Differences persisted after controlling for differences in conservatism, uninsurance, poor health, and rejection of Medicaid expansion. Resentment of African Americans' purported irresponsibility and entitlement to government assistance may interfere with states structuring and operating marketplaces to maximize health insurance opportunities for everyone available under the ACA. N/A.

Critical Review of ASME III Plasticity Correction Factors for Fatigue Design-By-Analysis of Nuclear Power Plant Components

Abstract Despite significant technological progress in recent years, elastic–plastic fatigue analysis of pressure-retaining components remains a time-consuming venture. Accordingly, nuclear pressure vessel design codes such as ASME Section III provide simplified elastic–plastic analysis procedures as a practical alternative. This approach can be excessively conservative under certain conditions due to the bounding nature of the applied plasticity correction factor, Ke. While this over conservatism was tolerable in the past, recent technical challenges arising due to consideration of environmentally assisted fatigue and design for long-term operation have posed difficulty in achieving acceptable fatigue usage based on extant Code assessment procedures for certain components. The incorporation of more accurate Ke factors has since been identified as a nuclear industry priority. This paper presents a critical review of Ke factors within ASME Section III, with particular attention given to an approach proposed by Ranganath, which has recently been approved for publication as an ASME Section III Code Case. Correction factors adopted within other nuclear and nonnuclear codes and standards (C&S) were also considered. The code-based Ke factors were compared with Ke factors obtained directly from various elastic–plastic finite element (FE) models of representative plant components. The results revealed a considerable difference in conservatism between the code-based methods. Based on the elastic–plastic finite element analysis (FEA) results, an alternative improved plasticity correction method is proposed in this paper. The need for a harmonized approach to determining Ke based on elastic–plastic FE analysis and further development of efficient plasticity correction methods for total life assessment are highlighted as desirable industry objectives.

Capturing differences in conservatism following earnings restatements: further evidence from Tehran Stock Exchange

PurposeThe present study seeks to shed further light on the effectiveness of Basu (1997) and Khan and Watts' (2009) differential timeliness metrics in detecting predictable differences in conservatism following corrections of restated earnings.Design/methodology/approachUsing cross-sectional and time-series analyses for companies listed on the Tehran Stock Exchange during 2009–2013, the results indicate lower conservatism for restating firms as compared to their counterparts during prerestatement period.FindingsUsing cross-sectional and time-series analyses for companies listed on the Tehran Stock Exchange during 2009–2013, the results indicate lower conservatism for restating firms as compared to their counterparts during prerestatement period. In contrast, our findings are indicative of higher conservatism among these restating firms during the years of restatements. Moreover, the time-series approach captures a higher conservatism for the restating firms during restatement years than prerestatement periods. Overall, these results provide insight into the usefulness of the metrics used in the restatement setting.Originality/valueSimilar to recent papers, the present study seeks to shed further light on the ability of Basu-based coupled with Khan–Watts-based measures of conservatism to detect situations in which companies' earnings are known to be significantly restated.

The Effect of Economic Conditions on Accounting Conservatism under IFRS in Europe

Abstract We analyse in detail conservative accounting practices in seventeen European countries, taking into account institutional factors. In addition, we examine the impact of IFRS adoption and the influence of changes in economic conditions on conditional conservatism. Specifically, we study the level of accounting conservatism before and after IFRS adoption detailing for the pre and crisis period and post-crisis period surrounding the 2007/2008 financial crisis. Our findings are consistent with a conservative accounting practice in Europe as a whole and in each country individually. Besides, opposite to that expected, the results provide evidence of more conservative accounting practice in Anglo-Saxon countries, but we find no significant differences in conservatism in Nordic countries. Another finding is a significant decrease in the level of conservatism after IFRS adoption. Regarding the joint impact of IFRS adoption and economic conditions, we find a decrease in conservatism in the pre and crisis period, followed by a substantial increase in the post-crisis period. Our results seem to be in line with the positive accounting theory when suggesting that conservatism plays a fundamental role as corporate governance and efficient contracting mechanism between managers and other stakeholders of the firm. Furthermore, the results suggest that the flexibility provided by IFRS allows adjusting the level of conservatism when economic conditions change.

Measuring moral politics: How strict and nurturant family values explain individual differences in conservatism, liberalism, and the political middle.

Individuals' political stances tend to place them into the conservative "right," the liberal "left," or the moderate "middle." What might explain this pattern of division? Moral Politics Theory (Lakoff, 1996) holds that political attitudes arise from moral worldviews that are conceptually anchored in contrasting family models-the strict-father and nurturant-parent models-while the political middle is morally "biconceptual," endorsing both models simultaneously. The present research examined these postulations empirically. Studies 1 and 2 tested the conceptual and predictive validity of the theorized models by developing an instrument assessing strict and nurturant parenting beliefs (the Moral Politics Scale [MPT]), and examining its power to predict political stances on issues seemingly unrelated to parenting attitudes (e.g., abortion, taxes, and same-sex marriage). Studies 3a and 3b explored construct validity while testing whether the family models translate into more general moral worldviews, which then serve as a foundation of political attitudes. Studies 4a through 4c tested generalizability, examining the relationship between the family models and political stances across different countries, data-collection modalities, and a representative American sample. Finally, Studies 5-7 explored biconceptualism and the tendency for these individuals to shift political attitudes as a consequence of situational factors, particularly moral framing, such that strict-father frames lead to increased support for conservative stances while nurturant-parent frames lead to increased support for liberal stances. Overall, we found support for each of MPT's assertions, suggesting that an important aspect of the conceptual and experiential basis of people's political attitudes lies in the strict-father and nurturant-parent family models. (PsycINFO Database Record (c) 2020 APA, all rights reserved).

Supplemental Material for Measuring Moral Politics: How Strict and Nurturant Family Values Explain Individual Differences in Conservatism, Liberalism, and the Political Middle

Supplemental Material for Measuring Moral Politics: How Strict and Nurturant Family Values Explain Individual Differences in Conservatism, Liberalism, and the Political Middle

Conservatism and the neural circuitry of threat: economic conservatism predicts greater amygdala-BNST connectivity during periods of threat vs safety.

Political conservatism is associated with an increased negativity bias, including increased attention and reactivity toward negative and threatening stimuli. Although the human amygdala has been implicated in the response to threatening stimuli, no studies to date have investigated whether conservatism is associated with altered amygdala function toward threat. Furthermore, although an influential theory posits that connectivity between the amygdala and bed nucleus of the stria terminalis (BNST) is important in initiating the response to sustained or uncertain threat, whether individual differences in conservatism modulate this connectivity is unknown. To test whether conservatism is associated with increased reactivity in neural threat circuitry, we measured participants’ self-reported social and economic conservatism and asked them to complete high-resolution fMRI scans while under threat of an unpredictable shock and while safe. We found that economic conservatism predicted greater connectivity between the BNST and a cluster of voxels in the left amygdala during threat vs safety. These results suggest that increased amygdala–BNST connectivity during threat may be a key neural correlate of the enhanced negativity bias found in conservatism.

Are Female CEOs and Chairwomen More Conservative and Risk Averse? Evidence from the Banking Industry During the Financial Crisis

This paper examines whether bank capital ratios and default risk are associated with the gender of the bank’s Chief Executive Officer (CEO) and Chairperson of the board. Given the documented gender-based differences in conservatism and risk tolerance, we postulate that female CEOs and board Chairs should assess risks more conservatively, and thereby hold higher levels of equity capital and reduce the likelihood of bank failure during periods of market stress. Using a large panel of U.S. commercial banks, we document that banks with female CEOs hold more conservative levels of capital after controlling for the bank’s asset risk and other attributes. Furthermore, while neither CEO nor Chair gender is related to bank failure in general, we find strong evidence that smaller banks with female CEOs and board Chairs were less likely to fail during the financial crisis. Overall, our findings are consistent with the view that gender-based behavioral differences may affect corporate decisions.

Differences in Conservatism between Big Eight and Non-Big Eight Auditors

Auditors’ incentives to be conservative are likely to vary both cross-sectionally and over time based on their legal liability exposure. We predict that Big Eight (Six/Five) auditors are likely to be more conservative than non-Big Eight Auditors. We show that the earnings reported by Big Eight auditees are more conservative than the earnings of non-Big Eight auditees, utilizing several measures from Basu (1997). The difference in conservatism between Big Eight and non-Big Eight auditees is higher in periods of high auditor liability exposure, consistent with Big Eight auditors being relatively more conservative when exposed to greater legal liability.

Internal Control Weaknesses and Accounting Conservatism

This study examines the relationship between accounting conservatism and internal control weaknesses (ICW) in the post–Sarbanes–Oxley Act of 2002 (SOX) period when the U.S. firms have been subject to higher regulations and enhanced corporate oversight and scrutiny. Our multivariate analyses show that the firms having ICW, especially the firms with company-level ICW, have significantly changed their conservative reporting practice from the pre- to the post-SOX period. The analyses further show that the ICW firms exhibit greater accounting conservatism in the post-SOX period compared with the firms with effective internal controls (non-ICW). The result is mostly driven by increased conditional conservatism by the firms having company-level ICW that are more pervasive in effect, less auditable, and more difficult to detect and prevent. Furthermore, we find that the difference in conservatism between ICW and non-ICW firms is more prominent in the first 3 post-SOX years than in the last 3 post-SOX years of the sample period. These findings suggest that enhanced corporate oversight and scrutiny have induced the ICW firms to use more accounting conservatism in an effort to reduce reporting uncertainty, enhance information reliability, and promote contracting efficiency. Our findings are consistent with prior studies that demonstrate a shift in the U.S. firms’ financial reporting strategies in response to stringent regulations and governance in the post-SOX period.

The Role of Social Values, Accounting Values and Institutions in Determining Accounting Conservatism

The extant literature on cross cultural differences in conservatism finds that a mix of institutional and economic variables influences differences in the level of conservatism across countries. Using the modified Gray model Doupnik and Tsakumis (J Acc Lit 3(1): 1–20, 2004) we examine whether societal values are a neglected explanatory factor for differences in levels of accounting conservatism across countries. Both unconditional and conditional conservatism are measured. Social values are measured using both a composite value for conservatism Hope et al. (J Acc Public Policy 27(5): 353–357, 2008) and individual values from Hofstede and Hofstede in Cultures and organizations: Software of the mind (2nd ed., New York, McGraw-Hill, 2005). A test sample of 89,481 firm-years from 1989 to 2006, compressed to 341 (or 342) country-year observations from 22 countries provides the data for OLS regressions. We find that after controlling for previously documented legal and financial institutional variables, both conditional and unconditional accounting conservatism are greater in countries with more conservative societal and accounting values. The Hofstede value of femininity (the importance of caring for others) is also significant for both measures of conservatism. These findings provide a more complete model for further testing of accounting conservatism and other topics using societal values. They also provide support for the modified Gray model using archival data. Finally, while both dimensions of conservatism matter and while they share some common explanators, both have unique additional influencing factors in culture and institutions.

Do Female CEOs and Chairs Constrain Bank Risk-Taking? Evidence from the Financial Crisis

This paper examines whether bank capital ratios and default risk are associated with the gender of the bank’s Chief Executive Officer (CEO) and Chairperson of the board. Given the documented gender-based differences in conservatism and risk tolerance, we postulate that female CEOs and board Chairs should assess risks more conservatively, and thereby hold higher levels of equity capital and reduce the likelihood of bank failure during periods of market stress. Using a large panel of U.S. commercial banks, we document that banks with female CEOs hold more conservative levels of capital after controlling for the bank’s asset risk and other attributes. Furthermore, while neither CEO nor Chair gender is related to bank failure in general, we find strong evidence that smaller banks with female CEOs and board Chairs were less likely to fail during the financial crisis. Overall, our findings are consistent with the view that gender-based behavioral differences may affect corporate decisions.

Earnings restatements and differential timeliness of accounting conservatism

We examine whether Basu's (1997) differential timeliness metric and the related C-Score metric are effective in detecting predictable differences in conservatism surrounding corrections of overstated earnings. Cross-sectional and time-series analyses, employing 2132 firms making restatements during 1999–2005, suggest Basu-based metrics capture variation in conservatism. Further, we find that increases in conservatism following restatements are contingent on improvements in corporate governance. Collectively, these results provide evidence of the usefulness of the Basu-based metrics in the restatement setting.

The emergence of second-tier auditors in the post-SOX era: An analysis of accounting conservatism

The increased resource constraints experienced by Big-N audit firms as a result of the passage of Sarbanes-Oxley Act (SOX) contributed to the emergence of second-tier audit firms as viable alternatives to the Big N for public company clients, as suggested by the PCAOB. This study provides a comparative examination of an important property of accounting numbers, earnings conservatism, for clients of Big-N and second-tier audit firms in both the pre- and post-SOX periods. Our findings indicate that, while there is a general increase in conservatism in the post-SOX period, there is no significant difference in conservatism between clients of Big-N and second-tier auditors in either the pre- or post-SOX periods. In addition, the results show greater conservatism in the post-SOX period among clients of Big-N and second-tier firms relative to that of other (non-Big-N/non-second-tier) audit firms. Overall, the results lend support to the PCAOB’s recommendation concerning the use of second-tier auditors as a viable alternative to the Big-N and to the effectiveness of SOX in increasing reporting conservatism among clients of all auditors conducting public company audits in the post-SOX period.

Female executives and earnings management

PurposeThe purpose of this paper is to examine the association between earnings management and the gender of the firm's executives.Design/methodology/approachPanel regressions of discretionary accruals on a set of female executive dummies and firm‐specific controls.FindingsThe results provide considerable evidence to suggest that firms with female chief financial officers (CFOs) are associated with income‐decreasing discretionary accruals, thereby implying that female CFOs are following more conservative earnings management strategies.Research limitations/implicationsIn general, the findings indicate that gender‐based differences in conservatism, risk‐aversion, and managerial opportunism may have important implications for financial reporting and corporate governance.Originality/valueThis paper extends prior research by addressing the potential effects of female executives on earnings management. The findings reported in this paper provide novel insights to the empirical financial accounting literature.

Female Executives and Earnings Management

Purpose – The purpose of this paper is to examine the association between earnings management and the gender of the firm’s executives. Design/methodology/approach – Panel regressions of discretionary accruals on a set of female executive dummies and firm-specific controls. Findings – The results provide considerable evidence to suggest that firms with female CFOs are associated with income-decreasing discretionary accruals, thereby implying that female CFOs are following more conservative earnings management strategies. Research limitations/implications – In general, the findings indicate that gender-based differences in conservatism, risk-aversion, and managerial opportunism may have important implications for financial reporting and corporate governance. Originality/value – This paper extends prior research by addressing the potential effects of female executives on earnings management. The findings reported in this paper provide novel insights to the empirical financial accounting literature.

Earnings Restatements and Differential Timeliness of Accounting Conservatism

We examine whether Basu’s (1997) differential timeliness metric and the related C-Score metric are effective in detecting predictable differences in conservatism surrounding corrections of overstated earnings. Cross-sectional and time-series analyses, employing 2,132 firms making restatements during 1999–2005, suggest Basu-based metrics capture variation in conservatism. Further, we find that increases in conservatism following restatements are contingent on improvements in corporate governance. Collectively, these results provide evidence of the usefulness of the Basu-based metrics in the restatement setting.

Age Differences in Conservatism: Evidence on the Mediating Effects of Personality and Cognitive Style

The present study investigates the commonly found age-conservatism relationship by combining insights from studies on the development of personality and motivated social cognition with findings on the relationships between these factors and conservative beliefs. Based on data collected in Belgium (N=2,373) and Poland (N=939), we found the expected linear effect of age on indicators of social-cultural conservatism in Belgium and Poland and the absence of such effects for indicators of economic-hierarchical conservatism. We further demonstrated that these effects of age on indicators of cultural conservatism in both countries were (in part) mediated through the personality factor Openness to Experience and the motivated cognition variable Need for Closure. The consistency of these findings in two countries with a very dissimilar sociopolitical history attests to the importance of the developmental perspective for the study of the relationship between age and conservatism.

The Impact of the Asian Financial Crisis on Auditors' Conservatism

ABSTRACT: We examine differences in conservatism between companies audited by Big 4 and non-Big 4 auditors during the financial crisis and post-crisis periods in Thailand. The results indicate a significant increase in conservatism following the Asian financial crisis. Moreover, Big 4 audit clients were more sensitive to bad news than non-Big 4 audit clients, particularly during the crisis period. In the post-crisis period, both Big 4 and non-Big 4 audit clients reported more conservative earnings. Interestingly, we found no significant difference in conservatism between Big 4 and non-Big 4 auditors in the post-crisis period, possibly due to the conscientious adoption of International Accounting Standards, more stringent control by regulatory bodies, and improvements in corporate governance in Thailand.

Nonaudit Services and Earnings Conservatism: Is Auditor Independence Impaired?*

AbstractWe examine whether the provision of nonaudit services (NAS) by incumbent auditors is associated with a reduction in the extent to which earnings reflect bad news on a timely basis (that is, news‐based conservatism). Reduced conservatism is expected to occur if relatively high levels of NAS result in reduced auditor independence and, ultimately, lower‐quality auditing. Because client‐specific demand for NAS is expected to vary, our proxy for the auditor‐client economic bond is the extent to which NAS purchases (relative to audit fees) are greater or less than expected. Using several different methods for identifying news‐based conservatism, we consistently find that higher than expected levels of NAS are not associated with reduced conservatism. This result is robust to allowing for endogenous NAS demand, as well as several explicit factors that may be associated with differences in conservatism. Similar conclusions arise from tests that use alternative measures of the economic bond between auditors and their clients, as well as in tests confined to either the Big 6 or non‐Big 6 audit firms. Our results are consistent with factors such as market‐based incentives, the threat of litigation, and alternative governance mechanisms offsetting any expected benefits to the audit firm from reducing its independence. We therefore conclude that recent legislative intervention aimed at restricting the supply of NAS is unlikely to result in increased independence in fact, although independence in appearance may be improved.