The Theory of Cognitive-Conditional Conservatism in Accounting

Rodrigo Leite and Ricardo Lopes Cardoso
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Ricardo Lopes Cardoso: Brazilian School of Public and Business Administration, Getulio Vargas Foundation, Rua Jornalista Orlando Dantas, 30, sala 206, Rio de Janeiro 22231-010, Brazil

Mathematics, 2020, vol. 8, issue 9, 1-7

Abstract: Literature from multiple fields in psychology and economics have identified that impulsive individuals are more prone to riskier behavior and are less conservative. Accounting literature has studied conservatism for many years, and demonstrated that there are two roots of conservatism, one unconditional and another conditional to news available at decision-making. However, there is no bridge linking both. Using an analytical model, we show that the conservatism level of an accountant is lower for impulsive individuals because of their reduced focus on future consequences of their decisions, which is coupled with an increased focus on present consequences. Hence, we put forward a theory of “cognitive-conditional conservatism”, that is, a third root of conservatism. Additionally, we also prove the asymmetry property of this behavior.

Keywords: accounting conservatism; cognitive reflection; cognitive-conditional conservatism (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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