The Impact of the Asian Financial Crisis on Conservatism and Timeliness of Earnings: Evidence from Hong Kong, Malaysia, Singapore, and Thailand

30 Pages Posted: 21 Dec 2009

See all articles by Thanyaluk Vichitsarawong

Thanyaluk Vichitsarawong

Oklahoma State University - Stillwater

Li Li Eng

Missouri University of Science and Technology

Gary K. Meek

Oklahoma State University - Stillwater - School of Accounting

Abstract

This paper examines conservatism and timeliness of earnings in the period surrounding the 1997 Asian financial crisis in Hong Kong, Malaysia, Singapore, and Thailand. Prior research suggests that managers tended to be more aggressive in reporting good news and delayed recognition of bad news during the financial crisis (less conservative and less timely in financial reporting). After the crisis, these four countries implemented corporate governance measures to stabilize their financial systems and improve regulation and supervision (that should improve conservatism and timeliness). We examine and find that conservatism and timeliness of earnings during the crisis period are low, but improved in the post-crisis period. More importantly, conservatism and timeliness in the post-crisis period is even greater than in the pre-crisis period. We measure conservatism using Basu's model and the accumulation of non-operating accruals suggested by Givoly and Hayn. The findings from both measures are consistent with an increase in conservatism after the crisis period. Overall, the results indicate that corporate governance reforms in these four countries had a positive impact on conservatism and timeliness of earnings.

JEL Classification: M43, M47, M41

Suggested Citation

Vichitsarawong, Thanyaluk and Eng, Li Li and Meek, Gary K., The Impact of the Asian Financial Crisis on Conservatism and Timeliness of Earnings: Evidence from Hong Kong, Malaysia, Singapore, and Thailand. Journal of International Financial Management & Accounting, Vol. 21, No. 1, pp. 32-61, Spring 2010, Available at SSRN: https://ssrn.com/abstract=1525976 or http://dx.doi.org/10.1111/j.1467-646X.2009.01035.x

Thanyaluk Vichitsarawong (Contact Author)

Oklahoma State University - Stillwater ( email )

Stillwater, OK 74078-0555

Li Li Eng

Missouri University of Science and Technology ( email )

1870 Miner Cir
Rolla, MO 65409
United States

Gary K. Meek

Oklahoma State University - Stillwater - School of Accounting ( email )

College of Business Administration
345 Business Building
Stillwater, OK 74078
United States
405-744-5100 (Phone)
405-744-5180 (Fax)

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