Accounting Conservatism and Risk Culture

Alessandro Mechelli () and Riccardo Cimini
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Alessandro Mechelli: University of Tuscia
Riccardo Cimini: University of Tuscia

Chapter Chapter 17 in Risk Culture in Banking, 2017, pp 387-401 from Palgrave Macmillan

Abstract: Abstract This chapter studies the relationships between accounting conservatism and bank solidity, both of which have a close relation with risk culture. Analysing a sample of 100 European listed entities that belong to the financial sector observed over the period of 2014–2015 (e.g., 200 firm-year observations), this research tests the hypothesis that a negative relationship exists between accounting conservatism and bank solidity. Results validate this hypothesis, confirming that there is a lower demand for accounting conservatism in the most solid entities. These results validate findings in the accounting literature that accounting conservatism mitigates bankruptcy risk (Biddle et al. in Accounting conservatism and bankruptcy risk, 2016) and thus tend to decrease in the most solid entities.

Keywords: Accounting conservatism; Bank solidity; Risk culture; Financial reporting (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-57592-6_17

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DOI: 10.1007/978-3-319-57592-6_17

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