Accounting Conservatism and Bankruptcy Risk

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    Author
    Biddle, G; Ma, MLZ; Song, FM
    Date
    2020
    Source Title
    Journal of Accounting Auditing & Finance
    Publisher
    SAGE Publications
    University of Melbourne Author/s
    Biddle, Gary
    Affiliation
    Accounting
    Metadata
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    Document Type
    Journal Article
    Citations
    Biddle, G., Ma, M. L. Z. & Song, F. M. (2020). Accounting Conservatism and Bankruptcy Risk. Journal of Accounting Auditing & Finance, Forthcoming, https://doi.org/10.1177/0148558X20934244.
    Access Status
    This item is embargoed and will be available on 2022-06-01
    URI
    http://hdl.handle.net/11343/239204
    DOI
    10.1177/0148558X20934244
    Abstract
    For a large sample of U.S. listed firms, we find that unconditional and conditional accounting conservatism help lower bankruptcy risk. We further find that the mitigating effect of accounting conservatism on bankruptcy risk functions via cash enhancement and earnings management mitigation channels. This evidence is relevant to accounting standards setting, financial regulation, financial risk management, and helps explain conservatism’s longstanding presence as a pervasive feature of financial accounting.

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