An Analytical and Empirical Measure of the Degree of Conditional Conservatism
针对现有文献中条件保守主义代理变量缺乏严格定义的问题，从截断分布出发推导出保守企业的非线性关系，并构建了企业年度层面的模型化代理变量，采用转换回归方法处理内生性，发现DCON与契约信息不对称和诉讼风险正相关、与税收负相关。
There is a profound gap between models of accounting conservatism and the proxies for conditional conservatism currently used by the empirical literature. Not one of the proxies employed by the empirical literature to date obtains from a rigorous definition of conditional conservatism. In contrast, this study defines conditional conservatism in terms of truncated distributions and derives analytically a nonlinear relation between revisions to returns and earnings news for the conservative firm. This nonlinear relation is shown to be mathematically equivalent to two linear relations conditioned on the firm’s degree of conservatism (DCON). From these relations, we derive a model-based proxy of the DCON at the firm-year level, which is a function of the determinants of conditional conservatism. To account for the endogeneity of the firm’s DCON and mitigate sample selection bias, the model is implemented empirically using a switching regression approach in which the switch point, namely, the DCON, is unobservable and endogenously determined. Consistent estimates of the parameters of the switching regression, including the endogenous determinants of conservatism posited by Watts (2003a, 2003b), are obtained by simultaneous maximum likelihood estimation. The results indicate that the DCON is a positive function of contractual information asymmetry and litigation risk but a negative function of taxes.