We analyse in detail conservative accounting practices in seventeen European countries, taking into account institutional factors. In addition, we examine the impact of IFRS adoption and the influence of changes in economic conditions on conditional conservatism. Specifically, we study the level of accounting conservatism before and after IFRS adoption detailing for the pre and crisis period and post-crisis period surrounding the 2007/2008 financial crisis. Our findings are consistent with a conservative accounting practice in Europe as a whole and in each country individually. Besides, opposite to that expected, the results provide evidence of more conservative accounting practice in Anglo-Saxon countries, but we find no significant differences in conservatism in Nordic countries. Another finding is a significant decrease in the level of conservatism after IFRS adoption. Regarding the joint impact of IFRS adoption and economic conditions, we find a decrease in conservatism in the pre and crisis period, followed by a substantial increase in the post-crisis period. Our results seem to be in line with the positive accounting theory when suggesting that conservatism plays a fundamental role as corporate governance and efficient contracting mechanism between managers and other stakeholders of the firm. Furthermore, the results suggest that the flexibility provided by IFRS allows adjusting the level of conservatism when economic conditions change.

Prague Economic Papers - impact factor journal of the University of Economics, Prague

Previous research has found that, when firms engage in environmental sustainability practices, they tend to give a consistent signal to external stakeholders by acting in a more responsible, transparent, and ethical manner, and these firms tend to exhibit high earnings quality. However, other studies have found that those activities may mask a poor earnings quality. On the other hand, firms with high debt levels face constraints in raising funds. In this study, we expect these firms, when involved in environmental reporting practices, to reveal an increase in their earnings quality in order to improve their ability to capture financing. Thus, we analyze whether the level of environmental disclosure and a firm’s debt increase earnings quality. To analyze the former association, we develop an environmental sustainability reporting index (ESReporting), based on GRI standards, using the content analysis for Portuguese firms from 2016 to 2020. We use earnings persistence as a proxy for earnings quality because it is a fundamental characteristic to determine firm value. Regarding debt, we include a financial indicator to analyze its effect on earnings persistence. To test the hypotheses, we estimate a multiple linear regression, applying panel data. Our results suggest that ESReporting and debt tend to positively affect earnings persistence. In addition, our evidence suggests that ESReporting produces a higher positive impact then debt. These results show that ESReporting and debt may be used as regulating mechanisms of earnings management. Besides, this article brings some insights to the improvement of earnings quality resulting from a higher commitment to environmental disclosure and contributing to monitoring managers’ activities.

The main source of financing is bank loans for Portuguese small and medium-sized entities (SMEs), which implies several constraints to obtaining additional funds. Relying on the argument of Positive Accounting Theory (PAT) that accounting choices are not neutral and on Agency Theory that information asymmetry prevails between insiders and outsiders, we analyzed the impacts of debt on earnings quality, focusing on its level, its increases, and its term of payment. We estimated econometric regressions using panel data with fixed effects over 2013–2019, using discretionary accruals as an inverse proxy of earnings quality. We found empirical evidence that the relationship between debt and earnings quality tends to vary in sign, as the quality of financial information deteriorates with debt, but as debt becomes high, firms tend to increase the quality of earnings. Furthermore, we found that short-term debt tends to decrease earnings quality more than long-term debt. This article aimed to contribute to the prior literature by collecting evidence that debt levels tend to be an incentive to increase earnings management and fill the gap by analyzing the influence of different debt features. This evidence is useful because earnings management may compromise both stakeholders’ confidence and the efficient allocation of capital.

This paper aims to analyze factors that influence social performance-related information disclosure in European countries. Specifically, the objective is to investigate the Board’s attributes (Diversity, Inclusion, People Development and Controversies). To achieve the goal, an empirical analysis was conducted with 2494 listed companies in Europe as support for the economic year 2021. To measure a possible link between the variables under study, a regression analysis was performed. Our results show that Board Diversity, Inclusion and People Development contribute positively to social performance disclosure, whereas Board Controversies negatively affect the dependent variable. Furthermore, the study results reveal that the country’s legal system is relevant to the company’s transparency. The model variables determine 62% of the social performance reporting variance. Our Results are useful for all non-financial information users, governments and organizations in developing sustainability reporting standards.