25Aug 2017

THE RELATIONSHIP BETWEEN INCOME SMOOTHING AND CONDITIONAL ACCOUNTING CONSERVATISM: EMPIRICAL EVIDENCE FROM MOZAMBIQUE.

  • PhD student, of Xi`an Jiaotong University ? P. R. China.
  • Professor Supervisor of Xi`an Jiaotong University ? P. R. China.
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As shown by Alarlooq et al. (2014), a vast group of researchers believes in a positive and important relationship between conservatism and earnings management, while others assert that there is no or a negative relationship between the two important determinants of disclosure decisions. However, there is no consensus on this. The present study examines the relationship between conditional conservatism and earnings management in the income smoothing modality. We empirically tested our hypotheses using Eckel\\\'s model (1981) to sort firms into smoothing firms and non-smoothing firms, and then we applied the Basu (1997) primary model and C_Score metric proposed by Khan and Watts (2009) to measure the level of conditional conservatism in each group. The scope of this paper runs from 1st January 2010 to 31st December 2016 and 483 firm-year observations were selected during the period. The results indicate that there is conditional conservatism in Mozambique since there is an anticipation of recognizing of losses in relation to gains. On the other hand, non-smoothing firms had greater opportunity to recognize future economic losses than firms that practice smoothing. This paper differs from previous because it will close the existing gap on the issue in, especially Mozambican context.

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[Tito Tomas Siueia and Wang Jianling (2017); THE RELATIONSHIP BETWEEN INCOME SMOOTHING AND CONDITIONAL ACCOUNTING CONSERVATISM: EMPIRICAL EVIDENCE FROM MOZAMBIQUE. Int. J. of Adv. Res. 5 (Aug). 1562-1579] (ISSN 2320-5407). www.journalijar.com

Tito Tomas Siueia
Supervisor

DOI:

Article DOI: 10.21474/IJAR01/5216      
DOI URL: https://dx.doi.org/10.21474/IJAR01/5216

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