Unconditional Accounting Conservatism & Efficient Contracting
Abstract
We examine how accounting conservatism affects contracting efficiency. More specifically,
we examine the link between unconditional conservatism and accounting sensitivity in
executive compensation contracts where we predict a negative relationship. We look at
theoretical arguments of unconditional conservatism and how it affects gains recognition, noise
in payoffs, and management possibilities for earnings management. We also consider the
inverse relationship between conditional and unconditional conservatism. We conduct our
study on Swedish listed firms between the years 2006 - 2016 by using an accrual based and a
cash-flow to earnings-based proxy to measure unconditional conservatism. We find an inverse
relationship suggesting that an increased degree of unconditional conservatism decrease
contracting efficiency and accounting sensitivity in executive compensation contracts.
Degree
Master 2-years
Other description
MSc in Accounting
Collections
View/ Open
Date
2018-07-02Author
Björklund, Joel
Ullah, Antor
Keywords
Unconditional conservatism
Contracting efficiency
Accounting sensitivity
Series/Report no.
Master Degree Project
2018:19
Language
eng