Measure Of Conservatism Research Articles

The relationship between cognitive style and political orientation depends on the measures used

AbstractThe present research investigated the reason for mixed evidence concerning the relationship between analytic cognitive style (ACS) and political orientation in previous research. Most past research operationalized ACS with the Cognitive Reflection Test (CRT), which has been criticized as relying heavily on numeracy skills, and operationalized political orientation with the single-item self-placement measure, which has been criticized as masking the distinction between social and economic conservatism. The present research recruited an Amazon Mechanical Turk sample and, for the first time, simultaneously employed three separate ACS measures (CRT, CRT2, Baserate conflict problems), a measure of attitudes toward self-critical and reflective thinking (the Actively Open-Minded Thinking Scale; AOT), and separate measures of social and economic conservatism, as well the standard measure of political orientation. As expected, the total ACS score (combination of the separate measures) was negatively related to social, but not economic, conservatism. However, the CRT by itself was not related to conservatism, in parallel with some past findings, while the two other measures of ACS showed the same pattern as the combined score. Trait reflectiveness (AOT) was related negatively to all measures of political conservatism (social, economic, and general). Results clearly suggest that the conclusion reached regarding the ACS-political orientation relationship depends on the measure(s) used, with the measure most commonly employed in past research (CRT) behaving differently than other measures. Future research must further pursue the implications of the known differences (e.g., reliance on numeracy vs. verbal skills) of ACS measures and distinguish different senses of reflectiveness.

Association of CSR Disclosure with Accounting Conservatism : A Study of Select Indian Mining Firms

The aim of the present study was to obtain evidence of the influence of corporate social responsibility (CSR) disclosure on accounting conservatism (AC). Measurement of conservatism was done by the use of discretionary accruals. The measurement of CSR reporting is based upon the guidelines issued by the Global Reporting Initiative (GRI), obtaining data from annual reports of different mining firms. The population considered in this study were Indian mining companies enlisted in PROWESS IQ database for the period from 2000-2015. This study used purposive sampling method for data collection for 34 mining companies. The results of this study indicated a significant negative relationship existing between accounting conservatism and CSR disclosure.

Evaluating the environmental hazard of industrial chemicals from data collected during the REACH registration process

Registration dossiers for 11,678 industrial chemicals were retrieved from the database of the European Chemicals Agency, of which 3566 provided a numerical entry for the corresponding predicted no effect concentration for the freshwater environment (PNEC). A distribution-based examination of 2244 of these entries reveals that the average PNEC of an industrial chemical in Europe is 238nmol/L, covering a span of 9 orders of magnitude. A comparison with biocides, pesticides, pharmaceuticals and WFD-priority pollutants reveals that, in average, industrial chemicals are least hazardous (hazard ranking: industrial chemicals≪pharmaceuticals<pesticides<Water Framework Directive priority pollutants<biocides). However, 280 industrial chemicals have a lower environmental threshold than the median pesticide and 73 have a lower environmental threshold than even the median biocide. Industrial chemicals produced and/or imported in higher tonnages have, on average, higher PNECs which most likely is due to the lower assessment factors used for the PNEC determination. This pattern indicates that the initial AF of 1000 comprises a measure of conservatism. The vast majority of PNEC values are driven by EC50 and NOEC data from tests with Daphnia magna. Tests with marine species are rarely provided for the hazard characterization of industrial chemicals.

Conservatism and Asymmetric Timeliness of Loss Reserves Management in Property-Liability Insurance Industry

In this paper, we study two types of accounting conservatism in the property-liability (PL (2) what the relations are between ex-post conservatism and other managerial incentives, including ex-ante conservatism, income smoothing, inflating financial strength ratio, taxation, and rate regulation; and (3) how much the opportunity cost is for being conservative in reserving. Our analysis focuses on loss reserve accruals since it is the most significant accruals on the balance sheet. One benefit of studying the P&L insurance industry is that we have specific and detailed information regarding the development of loss reserve accruals over time. Ex-ante conservatism is simply a positive bias in the initially reported incurred losses. The measure of ex-post conservatism is a regression coefficient that reflects the asymmetric timeliness of incurred losses in reporting good and bad news. We study all U.S. domiciled P&L insurance companies from 1996 to 2012. Our results show that P&L insurers, on average, significantly engage in both ex-ante and ex-post conservatism. The usage of ex-ante conservatism preempts the adoption of ex-post conservatism, but the relationship is nonlinear and a U-shape. This finding indicates that firms use ex-ante and ex-post conservatism to achieve different goals so that ex-ante conservatism cannot eliminate the space for ex-post conservatism. Moreover, we find that the level of ex-post conservatism is also restricted by income smoothing incentive, the incentive to inflate financial strength ratio, and high premium exposures to strict rate regulation. Finally, we test whether insurers are overly ex-post conservative and reserve more losses than needed. We do not find evidence supporting this prediction. Our back-of-the-envelope estimates indicate that the opportunity cost of engaging in accounting conservatism is modest.

Why Are Losses Less Persistent Than Profits? Curtailments vs. Conservatism

It is well documented that losses are less persistent than profits and that stock prices anticipate the lower persistence of losses. Yet the underlying explanation for these results is unclear. One explanation lies in the abandonment option, whereby firms with losses are more likely to curtail operations (e.g., Hayn [Hayn C (1995) The information content of losses. J. Accounting Econom. 20(2):125–153]). Another explanation involves timely loss recognition stemming from conservative accounting (e.g., Basu [Basu S (1997) The conservatism principle and the asymmetric timeliness of earnings. J. Accounting Econom. 24(1):3–37]). We provide direct evidence that curtailments are an important factor contributing to the lower persistence of losses. An implication of our results is that popular measures of conservatism, such as the measure proposed by Basu, also reflect curtailments. This paper was accepted by Suraj Srinivasan, accounting.

Quality Control in Audit Firms: Do Auditors Learn from Going Concern Errors?

This study examines whether auditors use their own going-concern opinion (GCO) errors (i.e., endogenous, results-based audit-quality signals) as audit-quality signals, and whether they use those signals to make adjustments in their subsequent office-wide audit quality. We argue (along with the PCAOB) that GCO errors signal potentially undesirable conservatism levels by auditors, and hence undesirable levels of audit quality. Auditors who recognize this should be able use GCO errors for quality-control purposes. We specifically examine whether auditors adjust their office-wide conservatism (i.e., audit quality) in response to changes in the number of Type I or Type II GCO errors observed in their office in a given period. Using several measures of auditor conservatism (signed abnormal accruals, likelihood of GCO, and subsequent GCO errors) we find evidence that auditors systematically decrease (increase) their office-wide conservatism levels subsequent to increases (decreases) in Type I errors. We also find evidence that auditors systematically increase (decrease) their office-wide conservatism levels subsequent to increases (decreases) in Type II errors. These results suggest that auditors use observable audit-quality signals for real-time quality-control purposes.

Biblical Conservatism and Psychological Type

The Village Bible Scale, a measure of biblical conservatism, was completed by 3,243 Church of England readers of the Church Times in 2013 alongside a measure of psychological type. Overall, biblical conservatism was higher for men than women, for those under 60 than those over 60, for those with school-level than those with university-level qualifications, for laity than clergy, and higher among evangelicals and charismatics than among those in Anglo-catholic or broad-church traditions. For the sample as a whole, the perceiving process was the only dimension of psychological type to predict biblical conservatism, which was positively correlated with sensing and negatively correlated with intuition. Within church traditions, sensing scores predicted biblical conservatism in Anglo-catholic and broad-church traditions, but not for evangelicals. Thinking function scores were positively correlated with biblical conservatism among evangelicals, but negatively correlated among Anglo-catholics. The findings point to the possible roles of psychological preferences in influencing predispositions for retaining or changing theological convictions.

Corporate governance and earnings conservatism in Malaysia

PurposeThis paper aims to investigate whether the revised Malaysian Code on Corporate Governance in 2007 enhances earnings conservatism. In addition, the authors examine the relationship between board of directors’ expertise and conservatism. The third objective is to investigate the relationship between audit committee characteristics and earnings conservatism.Design/methodology/approachThe sample of this study is based on 3,183 firm-year observations for a period of 2004-2009. The authors hand collected the corporate governance variables, whereas the remaining data were extracted from Compustat Global. The authors used two measures of conservatism. The first is the market-based model by Basu’s (1997), and the second measure is the accrual-based measure by Ball and Shivakumar (2005).FindingsThe authors find that the revision of Malaysian Code on Corporate Governance 2007 results in improving earnings conservatism. The authors find two audit committee characteristics, namely, audit committee financial expertise and independence increase earnings conservatism, after 2007. However, the authors could not find support whether board financial expertise mix affect conservatism.Research limitations/implicationsThis study did not consider other possible corporate governance variables that could influence earnings conservatism, as it would be a difficult task to gather them.Originality/valueThe authors provide evidence on the role of corporate governance and earnings conservatism in Malaysia.

Identifying Conditional Conservatism in Financial Accounting Data: Theory and Evidence

ABSTRACTUsing a financial reporting and valuation model, we investigate the construct validity of Basu's (1997) asymmetric timeliness (AT) regression coefficient as a measure of conditional conservatism in corporate financial reporting. We predict that the AT coefficient will be positive even in the absence of conditional conservatism, and it will vary with non-accounting factors even if the degree of conditional conservatism is held constant. Our empirical analysis shows that AT coefficient estimates vary in directions predicted by our theory. Specifically, we find that AT coefficient estimates increase with expected returns and asymmetry in the distribution of returns, and decrease with cash flow persistence. Importantly, we identify the spread between the variances of bad news and good news accruals as an alternative measure of conditional conservatism that is free of the effects confounding the AT coefficient. Consistent with a key implication of conditional conservatism, we find that the variance of bad news accruals is significantly higher than the variance of good news accruals primarily due to conditionally conservative accruals related to inventory write-downs, long-term asset write-downs, and goodwill impairments. A series of placebo tests provides additional support for the construct validity of our alternative measure of conditional conservatism.Data Availability: Data are publicly available from the sources indicated in the text.

On the Conditional Conservatism Measure: A Robust Estimation Approach

Recent research, due to Patatoukas and Thomas (2011) and Ball et al. (2013), focuses on Basu’s (1997) conditional conservatism measure and the existence of a denominator effect — whether the difference between the earnings-return coefficients of bad and good news firms (“the Basu coefficient”) is only due to the beginning-of-year price deflator. We address this issue head-on by applying the Theil-Sen (TS) estimation method which does not depend on the scaling of variables; the same coefficient estimates are obtained whether or not the regression equation is scaled by beginning-of-year price. Moreover, the TS estimates are intrinsically insensitive to outliers. Results show the following: (i) the Basu coefficient remains positive using TS; (ii) the Basu coefficient using TS are similar to those using OLS without scaling but much smaller than what scaled OLS show; (iii) the scaled OLS estimates appear to be influenced by a few outlier firms with negative returns and material losses; and (iv) OLS estimates are more volatile due to estimation error. Also, placebo tests suggested in Patatoukas and Thomas (2011) do not falsify our findings. In sum, the denominator effect does not overturn Basu’s hypothesis but the magnitude and variation of the Basu coefficient is much smaller than what traditional results show.

Does Forecast Bias Affect Financial Analysts’ Market Influence?

Prior studies find that analysts tend to bias their forecasts upward in poor information environments and downward in rich information environments, consistent with attempts to curry favor with management. We find that investors anticipate this behavior by reducing their response to upward forecasts in poor information environments and downward forecasts in rich information environments. Using Hugon and Muslu’s measure of analyst conservatism as an ex ante indicator of individual analysts’ forecast bias tendencies, we show that the stronger return response they find to conservative analysts’ forecast revisions is restricted to poor information environments, where optimistic analyst bias is prevalent. Our results suggest that analysts pay a price in market influence when their forecasts reinforce analysts’ typical forecast bias for the firm’s information environment. Conversely, analysts whose forecasts conflict with the typical bias for the firm are rewarded with larger than average return responses.

Accounting Conservatism Measures and Stock Returns: An empirical comparison of a New Income Statement Based Measure of Conservatism to Existing Measures of Accounting Conservatism

Accounting conservatism is the tendency to require less evidence to recognize losses in the financial statements and require a higher degree of evidence to recognize gains in the financial statements. Conservatism has been difficult to measure on a firm by firm basis. This paper proposes a new measure of conservatism that uses income statement variables. Using accounting information from publically listed companies during 2003-2012, I examine the value relevance of several conservatism measures. I find that the new measure provides results that are consistent with 2 of the 3 other existing measures and is a better fit at predicting value relevance as compared to the other measures examined in this paper.

Auditor tenure and accounting conservatism: evidence from Greece

Purpose This study aims to examine the relationship between auditor tenure and conservatism for firms in Greece. Greece not only has a high incidence of earnings management but is also required under the new European Commission (EC) regulation to comply with mandatory auditor rotation. Therefore, Greece is an ideal setting in which to study the association between auditor tenure and accounting conservatism. Design/methodology/approach Similar to Jenkins and Velury (2008), this paper uses Basu’s (1997) asymmetrical timeliness of earnings as a measure of conservatism. Following Li (2010), the regression is re-estimated for subsamples based on client importance as measured by the ranking of client sales among all clients audited by the firm. Findings In contrast to Li (2010), the results of this study, which used a sample of firms in Greece, indicate that conservatism decreases as the auditor–client relationship lengthens. Client importance does not appear to affect the relationship between auditor tenure and conservatism, as measured by asymmetric timeliness of earnings. However, when using the accrual–cash flow measure of conservatism (Ball and Shivakumar, 2005), it is found that auditor tenure is positively (negatively) associated with conservatism for less (more) important clients. The results suggest that longer auditor tenure may have a negative impact on audit quality in certain countries where accounting quality has been found to be poor. Therefore, the new EC regulation requiring mandatory auditor rotation may in fact improve audit quality for firms in Greece. Research limitations/implications This study’s sample consists of firms on the Athens Stock Exchange for the period of 1998-2011. This sample was purposely selected because of the unique conditions of rampant earnings management and low incentive in Greece for the auditors to exert effort to detect such practices. Moreover, Greece is subject to the new EC regulations requiring mandatory auditor rotation beginning in 2014. Future studies could examine this issue in alternate settings and over different time periods. Also, other cross-sectional variations among firms which affect the association between auditor–client tenure and audit quality may exist. Practical implications The findings are important to regulators such as the EC and indicate that Greece may be an appropriate setting in which to require mandatory auditor rotation. These results are also useful to auditors who wish to improve the audit quality and the public’s perception of their work. Originality/value Auditor tenure has been the subject of considerable debate, and regulators contend that long auditor tenure reduces audit quality. There may be a valid argument in favor of mandatory auditor rotation in countries particularly susceptible to low accounting quality due to issues such as rampant earnings management. Greece appears to be one such example, and this study provides support in favor of that argument by demonstrating that longer auditor tenure may lead to lower accounting quality in terms of conservatism. Therefore, the recent EC regulation may result in improved audit quality for firms in Greece.

Intellectual humility and religious tolerance

The present study explored the relationship between (a) intellectual humility toward religious beliefs and values and (b) religious tolerance. Pastors who identified as Christian (N = 196) completed measures of conservatism, religious commitment, intellectual humility toward religious beliefs and values, and religious tolerance. Intellectual humility was a positive predictor of religious tolerance, even when controlling for conservatism and religious commitment. An interaction was found between exposure to religious diversity and intellectual humility, such that exposure to religious diversity was positively related to religious tolerance only for participants who reported high levels of intellectual humility. We conclude by discussing limitations, areas for future research, and implications for interfaith dialog and engagement.

The moral foundations hypothesis does not replicate well in Black samples.

The current study examined the generalizability of the moral foundations hypothesis (Graham, Haidt, & Nosek, 2009), which predicts that conservatism will be positively related to the binding foundations (i.e., virtues of ingroup/loyalty, authority/respect, and purity/sanctity). Religiosity has been consistently linked with the binding foundations in predominately White samples, but Black people in the United States are both more religious and more liberal than White people. In a sample of college students (N = 693; 58.3% Black, 41.7% White), examination of measurement invariance suggested metric, but not scalar invariance. The relationship between conservatism and the binding foundations-specifically, respect/authority and purity/sanctity-was weaker in Black people than in White people. These results were replicated in a second sample (N = 490; 63.5% Black, 36.5% White) using a 4-item measure of conservatism rather than a single item. Once again examination of measurement invariance suggested metric but not scalar invariance, and conservatism was more weakly related to the binding foundations in Black people than it was in White people. Implications for future theory and research are discussed.

Mixed Reactions

This article hypothesizes that religious motivation can explain varied responses to the political use of religious rhetoric. Religious motivation—religion’s place in an individual’s life—is an important determinant of individual behavior and attitude formation, and variation in religious motivation can explain why some religious citizens are attracted to candidates using religious appeals while others are clearly not. Using a survey experiment, this article tests the effect of Judeo-Christian religious language and attempts to isolate differences among the religious in how they respond to religious rhetoric in the American political environment. The goal of this article then becomes twofold. First, it introduces a measure of religious motivation and demonstrates that it is a unique measure of individual difference with independent effects beyond traditional measures of religiosity, personality, and conservatism. The second goal is to demonstrate that religious motivation can explain variance in reactions to religious rhetoric within a campaign environment. Religious individuals respond differently to religious appeals, with some evaluating candidates higher when religious words were used while others rated candidates lower. The types of religious motivation (extrinsic, intrinsic, and quest) are shown to be much better predictors of responses to religious rhetoric than traditional measures of religiosity.

Pengaruh Agency Cost of Free Cash Flow Terhadap Tingkat Konservatisme dan Pengujian Efek Moderasi Kebijakan Hutang, Pendistribusian Kas, Persistensi Kas, dan Tata Kelola Perusahaan

This research investigates whether the J-type firm (high agency cost of free cash flow) provide more conservative financial statements than non J-type firm. Besides, this research also aim to examine the moderating effects of debt, dividend, stock repurchase, cash persistency, and corporate governance on the relationship between the level of agency cost of free cash flow and conservatism level of financial statements. This research uses two measurement of conservatism, namely accrual conservatism and market value conservatism. Research sample includes manufacturing companies listed in the Indonesian Stock Exchange for the year 2007, 2008 and 2010. The result proves that there is a positive and significant relationship between the level of agency cost of free cash flow and the two measurement of conservatism level of financial stataments. However, this research shows that there is no effect of the moderating variables on that relationship.

Masculine honor beliefs: Measurement and correlates

Masculine honor, particularly as defined by the Southern culture of honor, centers on the belief that aggression is sometimes justifiable and necessary, such as in response to insult or threat. While masculine honor has been examined in terms of cultural differences, it has been less often examined in terms of individual differences. We developed a measure of masculine honor beliefs (MHBS) inspired by research on the Southern culture of honor. Four studies showed that the MHBS demonstrated internal consistency, test–retest reliability, convergent validity with measures of trait aggression and sexism, discriminant validity from measures of social desirability, conservatism and self-esteem, and predictive and incremental validity in predicting reactions to honor-related provocation above and beyond participants' sex and other measures of honor beliefs. The MHBS allows masculine honor beliefs to be examined as an important factor in understanding men's motivations for aggressive behavior, particularly in response to provocation.

The effect of banking supervision on central bank preferences: Evidence from panel data

We examine the effects of banking supervisory architecture on central bank preferences, quantified through a recently proposed measure of central bank conservatism. Using a dynamic panel data specification we document that central banks serving both monetary policy and banking supervision functions are less inflation conservative than those with only a price stability mandate.

Implementation and Assessment of Moody Homogeneous Equilibrium Critical Flow Model of RELAP5-3D

According to “Standard Review Plan for the Review of Safety Analysis Reports for Nuclear Power Plants” (NUREG-0800) of the U.S. Nuclear Regulatory Commission, the homogeneous and thermal equilibrium critical flow model (HEM model) is acceptable for pressure and temperature analysis of the subcompartment of the containment. However, it was not built into the RELAP5-3D code. In order to provide the blowdown boundary conditions that meet the acceptance criteria for the subcompartment pressure and temperature response analysis, Institute of Nuclear Energy Research implemented and assessed the Moody HEM model of RELAP5-3D. The assessment phase was subsequent to the implementation of the Moody HEM model of RELAP5-3D. Three experiments of Marviken critical flow tests (CFTs) were selected as the assessment cases. They were CFT 15, CFT 22, and CFT 24. The assessment input decks of RELAP5-3D had been modified from the appendixes of the references. Additional comparisons with the results of the RELAP5-3D built-in Ransom-Trapp and Henry-Fauske critical flow models were also included. The comparisons of the calculated blowdown mass flow rate with the test data assessed the newly implemented model, which gave good prediction. Moreover, the comparisons between the results of the critical flow models of RELAP5-3D and the test data provided a measure of the relative conservatism of the critical flow calculations.