Conservatism and the Value Relevance of Financial Information

  title={Conservatism and the Value Relevance of Financial Information},
  author={Sudhakar V. Balachandran and Partha Mohanram},
This paper examines the association between conservatism and value relevance of accounting information. Prior literature (Lev & Zarowin 1999) has suggested that conservative accounting, especially the treatment of advertising and R&D, as one possible reason for decreasing value relevance. We measure conservatism using a variety of approaches in the extant literature including downward bias in book values (Beaver & Ryan 2000, Penman & Zhang 2002) and earnings (Lev & Nissim 2004). We examine the… CONTINUE READING