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AbstractWe 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.

Abstract:We investigate whether the positive relation between accounting accruals and information asymmetry documented for U.S. stock markets also holds for European markets, considered as a whole and at the country level. This research is relevant because this relation is likely to be affected by differences in accounting standards used by companies for financial reporting, in the traditional use of the banking system or capital markets for firm financing, in legal systems and cultural environment. We find that in European stock markets discretionary accruals are positively related with the Corwin and Schultz high-low spread estimator used as a proxy for information asymmetry. Our results suggest that the earnings management component of accruals outweighs the informational component, but the significance of the relation varies across countries. Further, such association tends to be stronger for firms with the highest levels of positive discretionary accruals. Consistent with the evidence provided by the authors, our results also suggest that the high-low spread estimator is more efficient than the closing bid-ask spread when analysing the impact of information quality on information asymmetry.

Purpose This study aims to construct two environmental disclosure indices (EDI), one obtained from the mandatory reporting (annual report) and the other from the voluntary reporting (sustainability report), to compare their evolution. In addition, the authors developed and evaluated a conceptual model that aims to analyse if the two EDI are affected by industry, environmental certification, lucratively and corporate governance attributes. The legitimacy, signalling and voluntary disclosure theories are used to support the theoretical relationship between the company’s characteristics, corporate governance and environmental disclosure. Design/methodology/approach Using the content analysis technique, the authors have developed two indices to assess the level of environmental disclosure in the companies’ mandatory and voluntary reporting. In addition, to analyse the determinants of EDI, the authors applied the technique of multiple linear regression using panel data. Findings Based on Portuguese listed companies (Euronext-Lisbon), the results, from 2015 to 2017, exhibited an increase of 14.6% and 25.8% for the EDI obtained from the annual reports and for EDI obtained from the sustainability reporting, respectively. In addition, the results revealed that the environmental certification, lucratively, number of members on board and number and proportion of women of the board directors tend to affect the annual reporting EDI. Regarding the sustainability reporting EDI, the results showed that the environmental certification, lucratively and proportion of independent members of the board of directors have an impact on it. Research limitations/implications The study focuses on quantitative rather than qualitative disclosures and it brings some insights to the theoretical field. Practical implications The results obtained can assist corporate decision-making processes regarding the improvement of environmental disclosure, both on the mandatory annual report and on voluntary sustainability reports. Originality/value This study brings new perspectives to this topical issue in accounting. Originally, this study is applied to Portuguese listed companies and it shows different trends and determinants of environmental disclosure when included in the annual reporting or sustainability reporting.