Unequal Impact of Conditional Conservatism on Components Accruals: Evidence from French Capital Market

Abstract

Applied to the French context, this study examines the unequal impact of conditional conservatism on accrual components. The study’s sample is an unbalanced panel of 331 French companies listed on Euronext Paris during the period time going from 2000 till 2015. First, this work aims at attributing empirical evidence to conditional conservatism using Basu (1997) and Khan and Watts (2009) models to detect this accounting practice. Then, it analyses differential implications of conditional conservatism on accrual components.

Actually, French companies are known to be conservative firms as they implement conditional conservatism through an accrual component of earning, two accruals drivers (Revenue and receivables) and the non-discretionary accrual. According to Richardson, Sloan, Soliman & Tuna (2005), the working capital component is the preferred tool, among accrual components, for the transmission of conditional conservatism.