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The purpose of this paper is to examine the moderating effect of International Financial Reporting Standards (IFRS) adoption on the relationship between accounting conservatism and the cost of equity in Canadian environmental, social, and corporate governance (ESG) firms.

Panel data was collected using the Thomson Reuters ASSET4 database on a sample of 284 Canadian ESG companies over the period 2007–2019.

The results obtained show a negative relationship between conditional conservatism and the cost of equity. The authors also find a negative relationship between unconditional conservatism and the cost of equity. In addition, IFRS adoption moderates the relationship between accounting conservatism and the cost of equity in Canadian ESG firms.

Future studies may extend the coverage of the study by including other countries and other sectors.

The results imply that prudent accounting signals information to investors about the quality of a company’s current and future earnings. The rates of return required by investors may be higher for conservative reporting companies that are more susceptible to opportunistic management discretion.

Although the previous literature has studied the direct correlation between accounting conservatism and the cost of equity, the present work focuses on examining the direct association between accounting conservatism and the cost of equity through the moderator effect of IFRS, which has not been widely used in studies of accounting conservatism until now.

We examine the association between conditional conservatism in initial public offering (IPO) underpricing and post-issue stock market survival in the U.S.

We adopt an archival approach by collecting data for 1,761 U.S. IPO issuers for the period 1990–2017. Regression analyses are conducted to evaluate the association between conditional conservatism in initial public offerings with underpricing and post-issue stock market survival. We identify firms that went public in the period 1990–2012. These firms are then followed for five years after the IPO to assess their stock market survival.

We find that pre-issue conditional conservatism is significantly associated with less IPO underpricing. We also detect that IPO firms with higher levels of conditional conservative reporting are more likely to survive in the post-IPO stock market in the three-, four-, and five-year periods after the IPO. Our main findings are robust after controlling for other factors in our models, such as IPO cycles, venture capitalists, research and development investment, and pre-IPO accounting performance.

We extend research by demonstrating that conditional conservative reporting practices help firms reduce their indirect costs of raising their initial public capital. Additionally, our research introduces new evidence on the association between pre-IPO conditional conservatism and after-issue stock market survival. Our findings empirically support the International Accounting Standards Board’s (IASB) decision to reintroduce the concept of prudence into the conceptual framework, by showing how conservative reporting can reduce information asymmetry in IPO firms.

The purpose of this research is to investigate the importance and status of conditional accounting conservatism indicators and financial flexibility for the management of legal claims of the company during the outbreak of Corona.

The research method was implemented using statistical analysis in the SPSS environment. The participants of this research can be experts and specialists working in companies admitted to the stock exchange and expert professors in accounting fields; auditing; economy; financial engineering and financial management, categorized. The data related to the localization tool of research variables were collected by snowball sampling method in the summer of 2022.

One of the main results of the research is that based on the opinions and professional experience of experts and professionals working in companies admitted to the stock exchange and academic experts, within a range of seven, “The number of legal claims of the company with electronic businesses” under the title of the main indicator in the legal claims of the company in the outbreak of Corona from the importance dimension; “Exchange rate fluctuations in financial resilience” under the title of the main indicator in financial resilience in the Corona outbreak from the functional dimension; “The number of legal claims of the company with government institutions” under the title of the main indicator in the company’s legal claims in the Corona outbreak from the functional dimension; “The company’s conservatism score” under the title of the main indicator in the conditional conservatism of accounting in the Corona outbreak from the functional dimension; “oil price fluctuations in financial resilience” under the title of the main indicator in financial resilience in the Corona outbreak from the importance dimension; and “type of industry based on total assets” under the title of the main indicator in the conditional conservatism of accounting in the Corona outbreak was calculated from the importance dimension.

Although the previous literature has studied the direct correlation between accounting conservatism and financial flexibility, this work focuses on examining the direct association between accounting conservatism and financial flexibility in the post-Corona era and is carried out to resolve legal claims.

This paper aims to examine the effect of conditional conservatism on audit fees and whether the firm’s engagement in sustainable practices moderates the relationship between conditional conservatism and audit fees.

Using a sample of 3,767 firm-year observations from 14 European Union countries over the period of 2006–2019, the authors adopt the ordinary least square estimator to perform a panel data analysis of the effect of conditional conservatism on audit fees, and the moderating role of the environmental, social and governance (ESG) scores on the relationship between conditional conservatism and audit fees.

The authors find that conditional conservatism has a significant negative effect on audit fees, suggesting that auditors charge lower audit fees on more conservative clients. The authors also find that firms engaging in ESG actions, whether combined or individual, pay higher audit fees. More interestingly, the authors provide evidence that the negative effect of conditional conservatism on audit fees is mitigated only when ESG performance is considered in combination. This implies that firms exhibiting less commitment to ESG sustainability practices are prone to paying reduced audit fees when engaged in more conservative reporting. The findings remain robust after conducting a battery of tests.

The findings of this study have practical implications for several parties, including companies, auditors and regulators. This study emphasizes the potential benefit associated with using conservative accounting practices in terms of shaping downward the amount of audit fees. However, it also highlights the importance of considering the additional audit costs associated with higher ESG scores when making decisions about implementing sustainable practices.

Unlike prior studies that investigate the direct impact of sustainable practices on audit fees, the present work contributes to the literature on the benefits and costs of ESG by examining the moderating role of ESG performance in the association between audit fees and conditional conservatism. To the best of the authors’ knowledge, this study is the first to examine this relationship. Theoretically, the research integrates the theories of audit risk and agency to provide a more comprehensive understanding of the drivers of audit fees.

The authors examine the effect of climate risk on accounting conservatism for a sample of listed companies operating in 26 developing countries.

The authors employ the Climate Risk Index (CRI) developed by Germanwatch to capture the severity of losses due to extreme weather events at the country level. The authors use different approaches to measure firm-level accounting conservatism.

The authors find that greater climate risk leads to a lower level of accounting conservatism. The results hold even after using different estimation methods.

Although the authors' analysis is limited to the period 2007–2016, it could be helpful for standard setters such as International Accounting Standards Board (IASB) and International Sustainable Standards Board (ISSB) as they may consider the potential effect of climate risk in their international standards.

The negative impacts of climate risk on the quality of financial reporting as proxied by accounting conservatism could trigger regulators and standard setters to require disclosure of information relating to climate risks and to incorporate climate-related risks in their risk management systems. In addition, for policymakers, incorporating accounting conservatism as a financial quality reporting standard could help promote greater transparency, accuracy and reliability in financial reporting in the context of climate risk.

The authors add to the literature on international differences in accounting conservatism by showing that climate risk significantly affects unconditional and conditional conservatism. The authors' results provide fresh evidence of the dark side of climate change. That is, climate risk is shown to decrease financial reporting quality.

This study sheds new light on the personality trait and provides evidence regarding the relation between narcissism and desirable accounting practices, specifically the impact of CEO narcissism on accounting conservatism.

The authors test the relation between CEO narcissism and accounting conservatism for a sample of 907 US companies and their corresponding CEOs for the period between 2010 and 2018. The authors apply three established models of accounting conservatism and measure executives' narcissism using a non-intrusive approach ubiquitous in the literature.

The authors find that CEO narcissism is associated with speculative accounting practices in the form of timely recognition of positive news and more prudent financial reporting of anticipated negative news. The authors provide the first empirical evidence that, despite its well-known negative effects on corporate financial reporting, executive narcissism can also produce positive outcomes.

While managerial overconfidence has received much attention, the effects of executives' narcissism are still widely unexplored (Chatterjee and Hambrick, 2007). The authors thus contribute to the literature by investigating the relationship between CEOs' narcissism and accounting conservatism. The authors conjecture CEO narcissism should have a twofold effect on prudent financial reporting. On the one hand, CEOs' narcissism should be associated with low levels of unconditional conservatism due to excessively fast good news recognition. On the other hand, narcissistic executives should be associated with early recognition of negative news and hence with higher levels of conditional conservatism.

The purpose of this study is to examine within a unified framework the timeliness and conservatism of accounting disclosure accommodating the transmission of news among the Scandinavian stock markets.

To this end the authors have used an augmented ordinary least squares (OLS) approach and univariate generalized autoregressive conditional heteroskedastic and vector autoregressive (VAR) modeling. The sample covers the period from 1987 to 2020, totaling 1452 observations. The sample was collected from the datastream database.

The empirical results of this study are consistent with previous findings and provide evidence that accounting reporting is timely and conservative while news is transmitted amongst the Scandinavian stock markets.

The findings could be important for investors, firms and regulators since failure of considering information that is derived from more advanced approaches could result in lower quality of annual reports of companies.

The authors examined the relationship between earnings yield and conditional risk using an augmented OLS model and the transmission of news among Scandinavian stock markets using a VAR model.

This study aims to examine the impact of economic, environmental and social (EES) indicators of sustainability performance on accounting conservatism and the moderating effect of good corporate governance (GCG) on this relationship in European environmental, social and governance (ESG) firms.

To test the study’s hypotheses, this paper applied linear regressions with panel data from 136 European companies selected from the ESG index between 2015 and 2022.

The results show a positive effect of economic and environmental sustainability scores on the accounting conservatism level. However, social score has a negative and significant effect on the level of accounting conservatism. The findings also show that GCG accentuates these effects.

The findings have several implications for companies, investors and academic researchers. For companies, EES reporting should be enhanced. For investors, sustainability performance is crucial in decision-making. The results show that exploring the interaction between sustainability performance scores and accounting conservatism is essential for academic researchers.

This paper is motivated by the limited research on EES sustainability scores and accounting conservatism around GCG, hence its pertinence for companies seeking to improve information quality.

This paper aims to provide deeper insights into the relationship between board gender diversity (BGD) and accounting conservatism by exploring the mediating role of corporate social responsibility (CSR) underlying this relationship.

The authors sample 10,252 firm-year observations from 932 publicly listed firms in 15 European countries over the 2010–2020 period. The authors conduct several models for panel data, applying mediation mechanisms, the Heckman two-stage model and the generalized method of moments and instrumental variable regressions to test the research hypotheses and account for endogeneity problems as well as unobservable heterogeneity.

Based on an integrated theoretical framework that draws insights from agency, resource dependence and stakeholder theories, the authors establish a positive and significant relationship between BGD and accounting conservatism, which is significantly mediated by CSR. The authors provide empirical evidence for the prior inconsistent results on the gender diversity-conservative accounting link and suggest that BGD promotes effective corporate governance and enhances CSR performance, which in turn, leads to higher conservatism in financial reporting.

The findings have important implications for regulators, policymakers and managers in understanding the drivers to ensure and control the quality of financial reporting. The results alert firms to the need to focus not only on the importance of BGD but also on CSR activities to ensure higher earnings reporting quality.

The results are significant in encouraging a higher presence of women on corporate boards, enhancing CSR performance and drawing social attention to mitigating earnings management practices through higher conservatism in financial reporting.

This paper recognized a gap in the literature not yet examined and contributed to the body of knowledge through the mediating role of CSR in the relationship between gender diversity and accounting conservatism.

Prior studies have found that managers adjust operational activities to tackle climate risk. However, the effects of climate risk on accounting practices are largely ignored in the literature. This paper investigates whether and how climate risk influences managers’ decision-making on the level of accounting conservatism and explains the results based on two competing channels: valuation demand and contracting demand.

Using firm level climate risk measures, we build a modified Basu (1997) model to conduct our econometric tests. In the baseline model, we use earnings before extraordinary items as the dependent variable, referred to as the earnings model. We control for different levels of fixed effect to identify the shocks of climate risk and mitigate potential concerns on endogeneity and bias in the model. A series of robustness tests provide supporting evidence for our baseline results and our explanation.

Using a sample of 35,832 firm-year observations on listed US firms over the period 2002 to 2019, we find that the perception of climate risk drives managers to choose the less conservative accounting policies. We conclude that the results are consistent with the valuation demand explanation but inconsistent with the contracting demand explanation.

The study provides additional evidence on how managers respond to climate risk by adjusting their corporate polices, specifically accounting policies. Our findings contradict the results of prior studies. We explain our results from a unique perspective. Overall, the study provides valuable insights for academics, investors, managers and policymakers.