CONSERVATISM AS A GOVERNANCE MECHANISMWhile there are several attributes of financial reporting that might beexpected to have contracting value, much of the recent literature examiningcontracting demands for accounting quality focuses on conditional conservatism,i.e., the asymmetric timeliness of the financial reporting system with respect toincorporating bad news relative to good news (Basu, 1997). Watts (2003a)
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