Title

Big 4 conservatism around the world

Document Type

Book chapter

Source Publication

Corporate Governance in Emerging Markets, CSR, Sustainability, Ethics & Governance

Publication Date

2014

First Page

197

Last Page

238

Publisher

Springer Berlin Heidelberg

Abstract

Conservatism is a long-established underlying principle of accounting but its implementation has come under the spotlight in recent years following the spate of well-publicized corporate collapses in the U.S. and elsewhere. Previous studies have shown that the Big 4 audit firms are more conservative than the non-Big 4 in the U.S. The current study examines whether the U.S. findings extend to other countries. In doing so, we make use of a relatively new measure of conservatism, namely, the C-score developed by Khan and Watts. We find that the conclusion drawn from U.S. studies, namely that the Big 4 are more conservative, extends to the international setting but only under certain conditions. Specifically, the Big 4 are more conservative in those countries where litigation and reputation risks, broadly defined, are high. This increase in conservatism represents a rational response by the Big 4 auditors to their greater exposure, vis-a-vis the non-Big 4 auditors, to litigation and reputation loss in those countries.

DOI

10.1007/978-3-642-44955-0_8

Publisher Statement

© Springer-Verlag Berlin Heidelberg 2014

Access to external full text or publisher's version may require subscription.

Additional Information

ISBN of the source publication: 9783642449543

Full-text Version

Publisher’s Version

Recommended Citation

Boubaker, S. and Nguyen, D.K. (eds.)(2014), Corporate Governance in Emerging Markets, CSR, Sustainability, Ethics & Governance, pp. 197-238. Springer Berlin Heidelberg. DOI 10.1007/978-3-642-44955-0_8.

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