Measure Of Conservatism Research Articles

Testing the Effect of Political Ideology on the Southern Vowel Shift among White Georgians

Against the backdrop of the fading Southern Vowel Shift, this paper explores the degree to which different young adults maintain or forego the SVS as a function of demographic traits and self-reported political ideology. Using data from 126 White young adults who grew up in Georgia and were recorded as university students, we find that the more canonically “Southern” pronunciations of the vowels in FACE, DRESS, TRAP, and PRIZE are positively correlated with a continuous measurement of political conservatism, even controlling for gender and hometown. These findings are consistent with speakers’ qualitative impression that the SVS is indexically linked to the conservative political beliefs attributed to a stereotyped White Southerner, constituting one factor that may motivate young adults in this changing landscape to maintain or forego the SVS.

Opposition to Same-Sex Parenting as Sexual Prejudice: Validity Evidence of a Model and Associated Factors in the Brazilian Context

The Beliefs about Children’s Adjustment in Same-Sex Families Scale (BCASSFS) is an instrument that measures rejection of the child-rearing and educational practices of same-sex parents. This scale evaluates beliefs that are organized in a bifactorial model referring to Individual Opposition and Normative Opposition. This study aimed to adapt the BCASSFS and examine its validity in the Brazilian context with a sexually diverse sample. A national survey was carried out with a sample of 1038 participants. It was used a sociodemographic questionnaire; a version of the BCASSFS adapted for the Brazilian context; a measure of sexual prejudice; and a measure of conservatism. Confirmatory factor analysis showed good fit indices for the model suggested for the original scale. Multigroup confirmatory factor analysis showed that the BCASSFS displayed measurement invariance between subsamples of different profiles, such as heterosexual-cisgender and LGBT + participants. Investigations of concurrent, convergent and criterion validity also showed that both scale factors were associated with theoretically related variables, in line with the literature. Together, these results show that the BCASSFS has good validity and can be used in the Brazilian context. By confirming the replication of the original model, this study contributes to broadening knowledge about these dimensions of sexual prejudice.

Using Machine Learning to Measure Conservatism

This study proposes an approach to measure conservatism using machine learning techniques that are not constrained by functional form restrictions. We extend the differential timeliness model to allow for observable characteristics related to conservatism to follow nonlinear relationships. By developing machine learning measures of conservatism, we draw attention to potential benefits and drawbacks and show how its insights complement conventional measures. Our broader goal is to investigate the effectiveness of machine learning algorithms for filtering noise in traditional archival studies and uncovering more complex empirical patterns. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.4983 .

Does Unconditional Accounting Conservatism Imply Upside or Downside Risk? Evidence from the Options Market

SYNOPSIS Conservatism captures an asymmetric reporting practice in response to uncertainty in business operations (earnings). Such uncertainty in business operations implies that investors are exposed to tail risk such that there is a probability of large earnings growth, offset by the probability of a large earnings decline. Existing literature has shown that accounting conservatism relates positively to stock returns. However, the literature is silent on whether this pricing is driven by positive earnings expectation or by the potential negative earnings growth. Using option-implied assets, we find that conservatism is priced by investors’ risk aversion (downside risk) rather than the potential upside. Several robustness tests confirm the findings. We also provide evidence that the returns are not driven by mispricing but as compensation for the risk implied by conservative reporting. We further decompose an alternate conservatism measure and find that our results are driven by the uncertainty in expenses rather than revenues.

Depicting Socio-Psychological Profile of COVID-19 Vaccination Hesitators and Rejecters

Vaccination hesitation and rejection is one of the major health risks in the epidemics of any infectious diseases with profound implications for public health in general. In order to provide a deeper insight into vaccine hesitation and rejection, we collected the data from individuals who did not take the COVID-19 vaccine in Serbia (N = 534), since the recently ended pandemic also confirmed the importance of these issues. We analyzed the associations between future vaccination intention and several psychological constructs including conspiracy ideation, concerns about contracting a disease and having major health problems, conservatism, pro-vaccination immediate social surroundings and empathy. An increased possibility for future vaccination was negatively related to conspiracy ideation and conservatism measures but positively associated with vaccination support from important others and threat perception of infectious disease and health concerns. Conspiracy beliefs mediated the links from both conservatism and vaccination support from important others toward future vaccinations intention, while threat perception of infection mediated the link between vaccination support and the criterion measure. Present findings enable a deeper understanding of vaccine hesitation and rejection and provide guidelines for psychologists and public health workers for facilitating vaccination against infectious disease.

Identifying accounting conservatism in the presence of skewness

AbstractThe asymmetric timeliness (AT) coefficient as a measure of accounting conservatism has been subject to much debate. We clarify the conditions under which the AT coefficient identifies accounting conservatism in the presence of skewness. Specifically, using an extensive simulation-based approach, we examine the joint impact of return skewness, earnings skewness, and return endogeneity. We show that skewness of returns and earnings distorts the AT coefficient as a measure of conservatism when returns are endogenous. While earnings skewness is a predicted consequence of conditional conservatism, return skewness is arguably unrelated to conservative reporting and cannot be tackled by simple skew reducing transformations or outlier-robust estimators. Empirically, we analyze AT and skewness of firms sorted on size and MTB, highlighting the importance of constant skewness across groups for accurate comparisons of accounting conservatism.

What does corporate sustainability reporting imply to auditors? Evidence from going-concern opinions and discretionary accruals

PurposeThis study aims to address the unanswered question of whether corporate sustainability has an impact on auditors’ overall judgment and to provide incremental evidence that corporate sustainability reporting has significant effect on financial auditors’ judgment.Design/methodology/approachFollowing prior research, the authors, respectively, apply auditors’ decisions on going-concern opinions and three discretionary accrual measures as proxies for auditor conservatism over financial risk and financial reporting risk. The authors collect corporate sustainability reporting and sustainability assurance data of U.S. firms from the global reporting initiative (GRI) database to construct and measure firms’ sustainability reporting activities.FindingsThe authors find that nonreporting firms are more likely to receive going-concern opinions than the reporting firms. In addition, reporting firms have a larger scale of discretionary accruals than their nonreporting counterparts. The authors also obtain consistent findings that sustainability assurance or accounting assurance providers strengthen the effect of sustainability reporting on auditors’ judgment.Research limitations/implicationsFirst, using discretionary accruals as measures of auditor conservatism is controversial, as accruals are the joint product by auditors and clients. Second, binary variables as a measure of sustainability reporting activities limit the inference. Lastly, the findings based on limited samples may weaken the external validity.Practical implicationsThe findings imply that firms engaging in sustainability activities are lower in financial or financial reporting risk. Firms can influence audit practitioners’ overall judgment through sustainability reports. Sustainability commitments and reporting have become a part of firms’ risk management.Social implicationsThe findings imply that sustainability reporting could become an integrated part of regulated corporate disclosure. Sustainability assurance reduces social costs by lending credibility to sustainability reports.Originality/valueThis paper provides incremental evidence that sustainability reports provide useful information and signals that influence auditors’ professional judgment. The findings also suggest that sustainability assurance strengthens auditors’ confidence in using sustainability information, thus amplifying the effect of sustainability reporting on auditors’ judgment.

Evaluations of the Authenticity of News Media Articles and Variables of Xenophobia in a German Sample: Measuring Out-Group Stereotypes Indirectly

Xenophobic and right-wing attitudes have become a major issue in Western societies. The present study investigated how such attitudes and stereotypes influence media perception in terms of identifying manipulated news articles. In a fake news paradigm, N = 326 participants provided self-report measures of xenophobia and conservatism, and were presented with real news media articles describing crimes that were committed either by putative German (i.e., in-group) or putative immigrant (i.e., out-group) perpetrators. Half of the articles were manipulated, and the participants were asked to rate the articles with respect to the perceived veracity of the article and the reprehensibility of the described criminal offences. Xenophobia, but not conservatism, was associated with poorer news discernment and higher perceived veracity in the immigrant offender condition, but not in the native German offender condition. Reprehensibility was not differentially associated with xenophobia in the two origin-of-offender conditions. The fake news paradigm revealed an out-group bias with respect to the perceived veracity of media news, and this result offers an alternative to measure stereotypes about immigrants more subtly than by explicit self-report. Xenophobia seems to make people less sensitive to hints that could inform them about the falsehood of information.

Standard Error Biases When Using Generated Regressors in Accounting Research

ABSTRACTWe analyze the standard error bias associated with the use of generated regressors—independent variables generated from first‐step regressions—in accounting research settings. Under general conditions, generated regressors do not affect the consistency of coefficient estimates. However, commonly used generated regressors can cause standard errors to be understated. Problematic generated regressors include predicted values, coefficient estimates, and measures derived from these estimates. Widely used generated regressors in accounting include measures of earnings persistence, normal accruals, litigation risk, and conditional conservatism. Using simple regression models and simulation, we demonstrate how generated regressors can produce understated standard errors in accounting research settings. We also demonstrate how the magnitude of the standard error bias is inversely related to the precision of the generated regressor. Finally, we discuss bootstrapping as a correction for the bias and demonstrate the pairs cluster bootstrap as a tool to improve inferences in common accounting settings involving generated regressors.

Not Getting Vaccinated? It Is a Matter of Problem-Solving Abilities and Socio-Cognitive Polarization.

The anti-COVID-19 vaccination campaign in the United States provided a significant contribution to the control of the virus spread. Despite the recommendations by public health institutions, vaccine skepticism and hesitancy contributed to low vaccine uptake, thus possibly disrupting the management of preventable diseases associated with the COVID-19 infection. The process that led individuals to accept COVID-19 vaccines required the ability to gather, synthesize, and weigh-up information within a novel, dynamically changing, complex, and ambiguous context. To deal with such complexity, we hypothesized that both the ability of reflection and flexible adaptation played a fundamental role. Based on previous research on cognitive predictors of vaccine refusal, we decided to investigate the combined role of two constructs, namely, problem-solving skills and socio-cognitive polarization (SCP), on vaccine acceptance and uptake. Two-hundred-seventy-seven US participants completed an online survey aimed to measure problem-solving ability, through a rebus puzzles task, and SCP, through a composite measure of absolutist thinking, political conservatism, and xenophobia. Mediation analyses indicated that SCP mediated the association between problem-solving ability and vaccine acceptance, so lower problem-solving abilities associated with higher polarization predicted vaccine rejection. Thus, our findings suggested that low problem-solving skills may represent a risk factor for COVID-19 vaccine refusal, with cognitive and social rigidity playing a crucial role in undermining the anti-COVID-19 vaccine uptake.

Conservatism as a general factor of social attitudes

Previous studies showed the existence of general factors in cognitive abilities, personality traits, and psychopathology symptoms. We hypothesized a similar factor on the apex of social attitudes? hierarchy; furthermore, we assumed that this factor reflects a conservatism-liberalism dimension. This hypothesis is tested by factorizing the space of ?isms? - a broad and comprehensive model of social attitudes obtained by the lexical paradigm, in an online study (N = 380; Mage = 32.34[SD = 11.74]; 66.8% females; participants were of Serbian nationality). A General factor is obtained and it was positively loaded by Tradition-oriented Religiousness (.76), Unmitigated Self-Interest (.76), and Subjective Spirituality (.34), with negative loadings of Communal Rationalism (-.53) and Inequality Aversion (-.46). Afterwards, we explored the nomological network of this factor: it correlated positively with the Social Dominance Orientation measure of Social Domination, Social Conservatism, Conservation Values, and Binding Moral Foundations; it also had negative associations with the Social Dominance Orientation measure of Egalitarianism, Self-transcendence Values, Individualizing Moral Foundations, Openness to Experience, Support for EU Integrations, Kosovo Independence, and Immigrants? Integration. The obtained nomological network is congruent with the interpretation of the General factor as conservatism. The data suggest that lay people have a singular core attitudinal dimension which they use to interpret and make sense of societal events and this fundamental dimension is conservatism-liberalism.

The changing association between political ideology and closed-mindedness: Left and right have become more alike

Evidence suggests that politically right-leaning individuals are more likely to be closed-minded. Whether this association is inherent or subject to change has been the subject of debate, yet has not been formally tested. Through a meta-analysis, we find evidence of a changing association between conservatism and facets of closed-mindedness in the U.S. and international context using 341 unique samples, over 200,000 participants, and 920 estimates over 71 years. In the U.S., data ranging from 1948 to 2019 revealed a linear decline in the association between social conservatism (SC) and closed-mindedness, though economic conservatism (EC) did not vary in its association with closed-mindedness over time. Internationally across 18 countries, excluding the U.S., we observed a curvilinear decline in the association between SC and closed-mindedness over that same time, but no change in ECs association. We also tested variation over time for attitudinal measures of conservatism ranging between 1987 to 2018. In the U.S., we observed a linear increase in the association between right-wing authoritarianism (RWA) and closed-mindedness, with a similar linear increase in the association between social dominance orientation (SDO) and closed-mindedness. Internationally, there was a curvilinear increase in the association between RWA and closed-mindedness, but no change in the association with SDO. We discuss the changes to the political landscape that might explain our findings.

Effects of air pollution on accounting conservatism

We examine the impact of air pollution on a firm's accounting policy conservatism. We hypothesize that, in response to risks associated with increased air pollution, firms apply more conservative accounting practices and utilize more conservative estimates in their reporting. Using a sample of Chinese firms, accounting conservatism measures, and a satellite-based air pollution metric, we confirm the validity of our hypothesis. Additional analysis suggests that the impact of air pollution on accounting policy conservatism is more salient for firms in high-pollution industries, firms under severe financial constraint, firms with higher environmental risk, and firms that receive high media coverage. Further, we document that air pollution does not significantly affect a firm's return on assets, year-on-year sales growth, or Tobin's Q measure. Hence, it is management's risk perception, not objective performance concern, that is driving accounting conservatism. Finally, specifically investigating accounting conservatism, we discover that, for firms with higher pollution levels, selling general and administrative expenses, liabilities provision, accrued expenses, and asset impairment loss are significantly higher.

CEO Facial masculinity and accounting conservatism

In this study, we examine the consequences of CEO facial masculinity for accounting conservatism. Facial masculinity is associated with an array of masculine behaviours including aggression, ambition, egocentricity, risk taking, and an increased desire to maintain social status. We predict that such behaviours lead to aggressive financial reporting practices that incorporate bad news into earnings in a less timely manner (i.e. lower conditional conservatism). Using a sample of S&P 1500 firms from 1993 to 2015, we find that CEOs’ facial masculinity is associated with less conservative accounting. This finding is robust to the use of several measures of conservatism. Further, we document that stronger external monitoring dampens the negative relationship between CEO facial masculinity and conservatism. Our findings complement recent work that reveals CEO facial masculinity is positively associated with fraud and AAERs, and contributes to the literature by documenting the effect of an ‘off the job’ CEO characteristic on accounting conservatism.

The Association between Accounting Conservatism and Cash Holding, Dividends and Leverage

This paper examines the effect of accounting conservatism on several financial decisions in Jordan. In particular, it aims to expose the effect of accounting conservatism on cash holdings, dividends distributions, and leverage for a sample of 83 Jordanian industrial and service firms listed on the Amman Stock Exchange (ASE) for the period 2015-2019. The feasible generalised least squares (FGLS) regression technique is used to test the association between accounting conservatism and financial decisions. The findings of this paper reveal a negative and significant relationship between accounting conservatism and cash holding. However, positive but insignificant relationships are reported between accounting conservatism and both dividends distributions and leverage. These findings have important implications for investors, corporate managers, and policymakers. The study recommends that future research use different measures of leverage, such as debt-to-equity ratio and long-term debt to equity ratio, in order to compare the results of different measuring instruments. It also recommends incorporating other measures of conservatism, such as market to book ratio and timeliness asymmetric measure.
 
 Received: 23 March 2022 / Accepted: 20 June 2022 / Published: 5 July 2022

Understanding How the Effects of Conditional Conservatism Measurement Bias Vary with the Research Context

We re-examine previous seminal studies on conditional conservatism (CC) that apply the asymmetric timeliness (AT) measure of Basu [(1997). The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting and Economics, 24(1), 3–37. https://doi.org/10.1016/S0165-4101(97)00014-1] and compare the outcomes with those based on the modified AT (MAT) measure of Badia et al. [(2021). Debiasing the measurement of conditional conservatism. Journal of Accounting Research, 59(4), 1221–1259. https://doi.org/10.1111/1475-679X.12366] and the spread in conditional variances (SCV) measure of Dutta and Patatoukas [(2017). Identifying conditional conservatism in financial accounting data: Theory and evidence. The Accounting Review, 92(4), 191–216. https://doi.org/10.2308/accr-51640]. Our conclusions are threefold. First, all three measures yield similar inferences in interrupted time-series settings that examine the change in CC following a policy mandate. Second, the inferences drawn from the AT measure in studies that model the determinants of CC based on cross-sectional settings are more sensitive to test specifications and research designs. Third, across the three measures, MAT shows the best empirical performance in terms of aligning with existing theories while being less affected by AT bias.

Is conditional conservatism a source of deviations of financial statements from Benford's Law?

PurposeIn this paper, the authors examine the association between conditional conservatism and deviations of the first digits of financial statement items from what are expected by Benford's Law.Design/methodology/approachThis research uses data of companies listed on the London Stock Exchange. The authors measure deviations of first digits from Benford's Law following Amiram et al. (2015) and firm-year conditional conservatism following previous studies (Basu, 1997; Khan and Watts, 2009; García Lara et al., 2016). The authors use multiple regressions to provide evidence for their hypothesis.FindingsThe results show that conditional conservatism is positively associated with deviations from Benford's Law. The findings are robust across different measures of deviations and conditional conservatism. Also, the authors find that the relationship between deviations from Benford's Law and conditional conservatism is more pronounced for firms with debt issuance, and for leveraged firms facing financial distress. Next, the authors’ analyses confirm previous evidence by showing that the first digits of financial statement items of UK listed companies conform to Benford's Law at the firm-specific level and the market level, and deviations of income statements are larger than those of balance sheets and cash flow statements.Research limitations/implicationsThe research makes significant contributions to the literature. First, this is the first study that provides empirical evidence suggesting that conditional conservatism may be a source of deviations from Benford’s Law. Second, the authors provide evidence confirming previous US findings (e.g. Amiram et al., 2015) showing that the distributions of first digits of financial statement items of UK listed companies also conform to Benford's Law.Practical implicationsThe authors’ findings have implications for auditors. Auditors should be aware of “false positive” for material misstatements when using Benford's Law as a risk assessment procedure. While both conditional conservatism and earnings management are related to deviations from Benford's Law, conservatism-related biases could indicate less audit risks.Originality/valueThe authors provide new and original evidence suggesting that conditional conservatism is related to deviations from Benford's Law.

Construction and Validation of the Legitimizing Income Inequality Scale

Although income inequality has become a focus of political and social discourse, counseling psychology research examining correlates and consequences of legitimizing income inequality remains sparse. A significant barrier to the study of income inequality is the lack of available measures to assess attitudes toward socioeconomic inequality. The purpose of this study was to develop and provide initial validity evidence for the Legitimizing Income Inequality Scale (LIIS). Results supported a bifactor structure for the LIIS with a general factor (ω = .95) and subfactors measuring Social Welfare Beliefs (ω = .92), Economic Fatalism (ω = .87), and Economic Meritocracy Beliefs (ω = .90). The LIIS significantly correlated in theoretically consistent directions with scores on measures of classist attitudes, socioeconomic conservatism, impression management, and colorblind racial attitudes. Implications for future research and training using the LIIS are provided.

IFRS adoption and unconditional conservatism: an accrual-based analysis

PurposeIn this paper we analyse the effect on unconditional conservatism of the mandatory adoption of International Financial Reporting Standards (IFRS) by the European listed firms in January 2005. Under the hypothesis that accounting regulation influences the accounting conservatism, we use a non-market-based measure of unconditional conservatism – the accrual-based measure proposed by Givoly and Hayn (2000) – to test this effect, controlling for the other determinants of the unconditional conservatism found in the accounting literature.Design/methodology/approachWe use a panel data of 10 years and 96 non-financial listed firms in the Spanish stock market in which the differences between local GAAP and IFRS are more important. A pre-estimation analysis of the data reveals that GLS with random effects is the correct estimation procedure. However, to try to deal with the likely endogeneity in the set of variables, the authors perform an estimate with a dynamic estimator for panels with few periods and many individuals where the independent variables are not strictly exogenous.FindingsAs expected, results show evidence that support a significant reduction on the unconditional conservatism of firms in the sample due to the adoption of IFRS. This evidence is relevant to equity market, debt market and corporate governance users of the financial information, and also for the policymakers who can assess the effects of their mandate.Research limitations/implicationsResults shown in this paper have all the limitations of system-, country-, sample- and event-specific studies but, along with many others drawn in alternative contexts, may help to correctly understand both the time-evolution and cross-sectional country differences of firms’ unconditional conservatism.Originality/valueThe study represents the first analysis of the effect of the adoption of IFRS on unconditional conservatism of the European listed companies using a non-market accrual-based measure. Results are not influenced by the dynamics of the stock market and, by comparison, allow us to analyse this influence in results provided by using market-based measures of the unconditional accounting conservatism provided by previous literature.

The impact of the input level of information system audit on the audit quality: Korean evidence

In response to the increasingly sophisticated corporate information system environment in producing accounting data, audit firms are undertaking information system (IS) audit in addition to conventional auditing. This study focuses on examining the impact of input level of IS audit on audit quality. We collected data on IS audit hours, a unique reporting requirement for Korean listed-firms as disclosed in the External Audit Implementation Details beginning in 2014. Simultaneously, we used the amount of discretionary accruals and measure of conservatism, C_Score as the proxies of the audit quality. By empirically examining a sample set that includes 2,370 corporate-year observations from the Korea Composite Stock Price Index (2014–2018), we found that IS audit hours and IS audit personnel had a statistically significant negative correlation when estimating with amount of discretionary accruals using the model of Kothari et al. (2005) and positive correlation with C_Score. Even when the group was divided into Big 4 and non-BIG 4, these results were apparent in firm samples that were audited by Big 4 audit firms, whereas those audited by non-Big 4 firms did not show these results. Taken together, the following conclusion can be derived. Audit quality has improved through conducting IS audit in response to new types of audit risks that have emerged because of the use of information technology in corporations. Significantly, this study analyzes empirically the effect that the effort of IS auditing has on improving audit quality by using a unique reporting requirement for Korean-listed firms. The study confirms that an appropriate level of IS audit input can improve audit quality. In addition, it is meaningful that IS audit practice is following the risk-based approach of the Clarified International Standards on Auditing (ISA).