The impact of earnings announcement on conservatism in Vietnamese financial statements

Abstract

Although there has been a diverse range of research topics regarding accounting conservatism in financial reporting, the issue of the impact of earnings announcement on conservatism in Vietnamese financial statements has not drawn researchers' attention. Based on Basu's model (1997), I use intra-announcement period returns and fiscal year returns to serve as economic news reflected in earnings within earnings announcement period and prior to earnings announcement, respectively. Next, I test conservatism in financial reporting of Vietnamese listed firms over the period of 2005 to 2014 using the two returns measures. The results show that conservatism principle is only ensured within earnings announcement period when auditors participate in preparing the firm's financial statements. The findings have implications for our understanding of the role of auditors in improving the quality of accounting information.