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The Practice of Accounting Conservatism by Listed Companies in a Developing Region: A Case Study of the Gulf Co-operating Council (GCC) Region / ASMA JARDAN

Swansea University Author: ASMA JARDAN

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DOI (Published version): 10.23889/SUthesis.59494

Abstract

The rise in transparency of businesses, especially those listed on stock exchanges, increases the pressure on board executives to act in a conservative manner and to avoid risky behaviour. These pressures impact on the developed markets (such as the London FTSE exchange and Wall Street in New York)...

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Published: Swansea 2021
Institution: Swansea University
Degree level: Doctoral
Degree name: Ph.D
Supervisor: Rich, Nick L. ; Barron, Andrrew R.
URI: https://cronfa.swan.ac.uk/Record/cronfa59494
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first_indexed 2022-03-04T14:47:57Z
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The concept of accounting conservatism which is the use of conservative practices by businesses that are shown in the financial reports of the business concerned has gathered increasing interest by stakeholders and regulators. However, developed markets tend to have mature systems that support good governance whereas in the developing regions there is less control and more opportunity for risky behaviours so as to exploit growth of the economies. The academic literature is dominated by studies of developed markets and a gap was identified for a greater understanding of the constraints and context-rich influences on the practice of accounting conservatism by businesses listed on the exchanges of developing countries that are transitioning from rentier economies. This study, using a theory-building approach, was designed to conceptualise accounting conservatism and then to test a literature-derived model in the context of a developing region. The region selected was the GCC stock exchanges and key industrial/commercial sectors within the markets. The model was developed and tested by world-renowned academic and Board-level staff, from developed and developing markets, before being used to test the conformance of businesses listed on the GCC exchanges. The researcher applied the model to multiple sectors in five of the GCC economies and compared and contrasted practices by individual organisations, sectors, and the market itself to test the level of conservativeness in practice. The findings show a significant gap in the body of knowledge concerning the application and practice of accounting conservatism in this developing region. Previous studies have tested only single practices/factors of businesses to determine whether they were conservative or not. The holistic model developed by the researcher shows significant influences from equity stakeholders, Chief Executive and Chief Financial officer tenure, board diversity, gender balancing and the presence of local royal family members on the board and/or as equity holders directly support greater conservatism and are supported by the use of &#x2018;Big 4&#x2019; auditors. These findings show a new set of relationships and conditions which support the modern application of the principle of accounting conservatism and differences with the findings of previous studies conducted in developed markets. The conclusions of the study show that the gap in understanding the developing country and market context has been closed through the validity of the model produced and that the model has predictive utility in determining how a company will operate under certain prevailing circumstances. The model can therefore support more traditional measures (formulae) that address quantitative business performance and the model offers many new insights into the practices of listed businesses. The model is offered to the academic community for further testing and to frame subsequent studies in this vital field of study.</abstract><type>E-Thesis</type><journal/><volume/><journalNumber/><paginationStart/><paginationEnd/><publisher/><placeOfPublication>Swansea</placeOfPublication><isbnPrint/><isbnElectronic/><issnPrint/><issnElectronic/><keywords/><publishedDay>14</publishedDay><publishedMonth>4</publishedMonth><publishedYear>2021</publishedYear><publishedDate>2021-04-14</publishedDate><doi>10.23889/SUthesis.59494</doi><url/><notes>Due to Embargo and/or Third Party Copyright restrictions, this thesis is not available via this service.</notes><college>COLLEGE NANME</college><CollegeCode>COLLEGE CODE</CollegeCode><institution>Swansea University</institution><supervisor>Rich, Nick L. ; Barron, Andrrew R.</supervisor><degreelevel>Doctoral</degreelevel><degreename>Ph.D</degreename><degreesponsorsfunders>King Saud University</degreesponsorsfunders><apcterm/><lastEdited>2022-03-07T12:22:29.5370138</lastEdited><Created>2022-03-04T14:41:54.7135416</Created><path><level id="1">Faculty of Humanities and Social Sciences</level><level id="2">School of Management - Business Management</level></path><authors><author><firstname>ASMA</firstname><surname>JARDAN</surname><order>1</order></author></authors><documents/><OutputDurs/></rfc1807>
spelling 2022-03-07T12:22:29.5370138 v2 59494 2022-03-04 The Practice of Accounting Conservatism by Listed Companies in a Developing Region: A Case Study of the Gulf Co-operating Council (GCC) Region 41dd8462036ca222104553946a286030 ASMA JARDAN ASMA JARDAN true false 2022-03-04 The rise in transparency of businesses, especially those listed on stock exchanges, increases the pressure on board executives to act in a conservative manner and to avoid risky behaviour. These pressures impact on the developed markets (such as the London FTSE exchange and Wall Street in New York) as well as developing markets and regions. The concept of accounting conservatism which is the use of conservative practices by businesses that are shown in the financial reports of the business concerned has gathered increasing interest by stakeholders and regulators. However, developed markets tend to have mature systems that support good governance whereas in the developing regions there is less control and more opportunity for risky behaviours so as to exploit growth of the economies. The academic literature is dominated by studies of developed markets and a gap was identified for a greater understanding of the constraints and context-rich influences on the practice of accounting conservatism by businesses listed on the exchanges of developing countries that are transitioning from rentier economies. This study, using a theory-building approach, was designed to conceptualise accounting conservatism and then to test a literature-derived model in the context of a developing region. The region selected was the GCC stock exchanges and key industrial/commercial sectors within the markets. The model was developed and tested by world-renowned academic and Board-level staff, from developed and developing markets, before being used to test the conformance of businesses listed on the GCC exchanges. The researcher applied the model to multiple sectors in five of the GCC economies and compared and contrasted practices by individual organisations, sectors, and the market itself to test the level of conservativeness in practice. The findings show a significant gap in the body of knowledge concerning the application and practice of accounting conservatism in this developing region. Previous studies have tested only single practices/factors of businesses to determine whether they were conservative or not. The holistic model developed by the researcher shows significant influences from equity stakeholders, Chief Executive and Chief Financial officer tenure, board diversity, gender balancing and the presence of local royal family members on the board and/or as equity holders directly support greater conservatism and are supported by the use of ‘Big 4’ auditors. These findings show a new set of relationships and conditions which support the modern application of the principle of accounting conservatism and differences with the findings of previous studies conducted in developed markets. The conclusions of the study show that the gap in understanding the developing country and market context has been closed through the validity of the model produced and that the model has predictive utility in determining how a company will operate under certain prevailing circumstances. The model can therefore support more traditional measures (formulae) that address quantitative business performance and the model offers many new insights into the practices of listed businesses. The model is offered to the academic community for further testing and to frame subsequent studies in this vital field of study. E-Thesis Swansea 14 4 2021 2021-04-14 10.23889/SUthesis.59494 Due to Embargo and/or Third Party Copyright restrictions, this thesis is not available via this service. COLLEGE NANME COLLEGE CODE Swansea University Rich, Nick L. ; Barron, Andrrew R. Doctoral Ph.D King Saud University 2022-03-07T12:22:29.5370138 2022-03-04T14:41:54.7135416 Faculty of Humanities and Social Sciences School of Management - Business Management ASMA JARDAN 1
title The Practice of Accounting Conservatism by Listed Companies in a Developing Region: A Case Study of the Gulf Co-operating Council (GCC) Region
spellingShingle The Practice of Accounting Conservatism by Listed Companies in a Developing Region: A Case Study of the Gulf Co-operating Council (GCC) Region
ASMA JARDAN
title_short The Practice of Accounting Conservatism by Listed Companies in a Developing Region: A Case Study of the Gulf Co-operating Council (GCC) Region
title_full The Practice of Accounting Conservatism by Listed Companies in a Developing Region: A Case Study of the Gulf Co-operating Council (GCC) Region
title_fullStr The Practice of Accounting Conservatism by Listed Companies in a Developing Region: A Case Study of the Gulf Co-operating Council (GCC) Region
title_full_unstemmed The Practice of Accounting Conservatism by Listed Companies in a Developing Region: A Case Study of the Gulf Co-operating Council (GCC) Region
title_sort The Practice of Accounting Conservatism by Listed Companies in a Developing Region: A Case Study of the Gulf Co-operating Council (GCC) Region
author_id_str_mv 41dd8462036ca222104553946a286030
author_id_fullname_str_mv 41dd8462036ca222104553946a286030_***_ASMA JARDAN
author ASMA JARDAN
author2 ASMA JARDAN
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publishDate 2021
institution Swansea University
doi_str_mv 10.23889/SUthesis.59494
college_str Faculty of Humanities and Social Sciences
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hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Business Management{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Business Management
document_store_str 0
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description The rise in transparency of businesses, especially those listed on stock exchanges, increases the pressure on board executives to act in a conservative manner and to avoid risky behaviour. These pressures impact on the developed markets (such as the London FTSE exchange and Wall Street in New York) as well as developing markets and regions. The concept of accounting conservatism which is the use of conservative practices by businesses that are shown in the financial reports of the business concerned has gathered increasing interest by stakeholders and regulators. However, developed markets tend to have mature systems that support good governance whereas in the developing regions there is less control and more opportunity for risky behaviours so as to exploit growth of the economies. The academic literature is dominated by studies of developed markets and a gap was identified for a greater understanding of the constraints and context-rich influences on the practice of accounting conservatism by businesses listed on the exchanges of developing countries that are transitioning from rentier economies. This study, using a theory-building approach, was designed to conceptualise accounting conservatism and then to test a literature-derived model in the context of a developing region. The region selected was the GCC stock exchanges and key industrial/commercial sectors within the markets. The model was developed and tested by world-renowned academic and Board-level staff, from developed and developing markets, before being used to test the conformance of businesses listed on the GCC exchanges. The researcher applied the model to multiple sectors in five of the GCC economies and compared and contrasted practices by individual organisations, sectors, and the market itself to test the level of conservativeness in practice. The findings show a significant gap in the body of knowledge concerning the application and practice of accounting conservatism in this developing region. Previous studies have tested only single practices/factors of businesses to determine whether they were conservative or not. The holistic model developed by the researcher shows significant influences from equity stakeholders, Chief Executive and Chief Financial officer tenure, board diversity, gender balancing and the presence of local royal family members on the board and/or as equity holders directly support greater conservatism and are supported by the use of ‘Big 4’ auditors. These findings show a new set of relationships and conditions which support the modern application of the principle of accounting conservatism and differences with the findings of previous studies conducted in developed markets. The conclusions of the study show that the gap in understanding the developing country and market context has been closed through the validity of the model produced and that the model has predictive utility in determining how a company will operate under certain prevailing circumstances. The model can therefore support more traditional measures (formulae) that address quantitative business performance and the model offers many new insights into the practices of listed businesses. The model is offered to the academic community for further testing and to frame subsequent studies in this vital field of study.
published_date 2021-04-14T04:16:51Z
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