Please use this identifier to cite or link to this item: http://hdl.handle.net/2440/77803
Type: Journal article
Title: Accounting conservatism and bankruptcy
Author: Lee, S.C.
Chen, J.L.
Jiang, I.M.
Hsu, C.Y.
Citation: Journal of Accounting, Finance & Management Strategy, 2012; 7(2):41-54
Publisher: Zhonghua Guanli Jixiao Pingjian Xuehui
Issue Date: 2012
ISSN: 1556-5793
Statement of
Responsibility: 
Shih-Cheng Lee, Jiun-Lin Chen, I-Ming Jiang and Cheng-Yi Hsu
Abstract: This paper examines the relationship between accounting conservatism and bankruptcy. With 52,203 firm-year observations for 8,051 individual firms during 1986-2003, we show that accounting conservatism assists in predicting financial distress. All three different conservatism proxies (GAAP-mandated, accrual-based and market-bsed measures) provide significant and meaningful information for default forecasting. Firms with less conservatism are more likely to experience bankruptcy. Our findings support the economic role of conservatism and provide critical information regarding the debate whether conservatism should be eliminated in financial accounting.
Keywords: Accounting conservatism; financial disterss; bankruptcy probability
Rights: Copyright status unknown
RMID: 0020124534
Appears in Collections:Business School publications

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