Estimation and empirical properties of a firm-year measure of accounting conservatism

Mozaffar Khan, Ross L. Watts

Research output: Contribution to journalArticlepeer-review

665 Scopus citations


We estimate a firm-year measure of accounting conservatism, examine its empirical properties as a metric, and illustrate applications by testing new hypotheses that shed further light on the nature and effects of conservatism. The results are consistent with the measure, C_Score, capturing variation in conservatism and also predicting asymmetric earnings timeliness at horizons of up to 3 years ahead. Cross-sectional hypothesis tests suggest firms with longer investment cycles, higher idiosyncratic uncertainty and higher information asymmetry have higher accounting conservatism. Event studies suggest increased conservatism is a response to increases in information asymmetry and idiosyncratic uncertainty.

Original languageEnglish (US)
Pages (from-to)132-150
Number of pages19
JournalJournal of Accounting and Economics
Issue number2-3
StatePublished - Dec 2009
Externally publishedYes


  • Asymmetric timeliness
  • Conservatism
  • Firm-year measure
  • Information asymmetry
  • Litigation


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