Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
Conditional Conservatism in U.S. High- and Low
Technology Firms
Mariem Khalifa , Hamadi Matoussi and Samir Trabelsi**
We investigate the level of conditional conservatism in the U.S. hightechnology and low-technology firms. Our findings further the
conclusions of Chandra (2011) that high-technology firms are less
conditionally conservative relative to low-technology firms. Previous
evidence from Qiang (2007) and García-Lara, García-Osma and
Penalva (2009) are expanded by examining the drivers of this crosssectional difference in conditional conservatism between high- and
low-technology firms. As shown in prior literature, there are four
potential explanations for accounting conservatism: Contracting,
litigation, taxation, and regulation (Basu, 1997; Watts, 2003a; Qiang,
2007 and García-Lara et al., 2009). Our empirical tests are consistent
with high-technology firms which are less conditionally conservative
than low-technology firms. The level of conditional conservatism
increases with the level of leverage regardless of the technology level
of the firm. Only low-technology firms are more conditionally
conservative when they face higher auditor litigation risk. We find that
neither in high-technology firms nor in low-technology firms, taxation
affects conditional conservatism.
Keywords:
Conditional
conservatism;
Contracting; Litigation risk; Taxation.
High-technology;
Low-technology;
JEL Classification: C23, L63, L65, L86, L96, M41, O51.
_________________________________________________________
Mariem Khalifa , Visiting PhD Candidate, Brock University
Hamadi Matoussi, Professor of Finance, Manouba University, hamadi.matoussi@iscae.rnu.tn
Samir Trabelsi**, Associate Professor of accounting, Brock University, strabelsi@brocku.ca
**
Corresponding author
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