Международный журнал бухгалтерских исследований

Абстрактный

Debt Contracting and Conditional Accounting Conservatism

Salami Suleiman

This study examines the effects of debt on accounting conservatism in the conglomerate sector. The author proxy debt in the form of total debt (long term plus short term). Conditional accounting conservatism was measured using asymmetric accrual to cash flow conservatism model. Data for the study were obtained from the Nigerian Stock Exchange Fact Book and the companies’ annual report from the period 2003 to 2010. The extent of the influence of debt was estimated using pooled regression method of analysis utilising SPSS 17 statistical package. Consistent with debt- equity hypothesis under positive accounting theory that managers of firms tend to overestimate their earnings so as not to violate debt covenants, our result reveals a significant negative influence of total debt on conservative reporting. Therefore, the author recommends that regulatory authorities’ e.g., SEC should ensure food and beverages firms have optimal level of debt to improve realization of accounting numbers.