Re-examination of the Effects of Nonlinearity and Multi-period Lags on Basu''s Measure of Conservatism: Risk and Regulation Factors

• Main Authors: Ching-Chia Cheng, 程景嘉
• Other Authors: 劉啟群
• Format: Others
• Language: en_US
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/45876372392550657094

碩士 === 國立臺灣大學 === 會計學研究所 === 100 === This paper re-examines the effects of firm characteristics on the extent of conservatism under nonlinear and multi-period earnings responses model. Previous studies use Basu’s (1997) measure of conservatism to examine whether firms with a certain characteristic would exhibit higher extents of conservatism than others, yet Lin and Liu (2011) suggest that the attributes of nonlinear and lagged earnings responses should also be considered. I choose several firm characteristics to re-examine the conclusions in prior studies in this paper. For the risk factors, I choose auditor’s litigation risk, firm’s litigation risk, firm age, and membership in high-tech industries; for the regulation factors, I examine whether the passage of SOX would result in firms’ higher exhibition of conservatism. My empirical results indicate that firms would exhibit different extents of conservatism when considering the different absolute magnitudes of news or lagged earnings responses, and suggest that the conclusion in prior literature may need to be reconsidered.