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Article
Evaluation of the Conservatism Level in Kuwait Stock Exchange: By Using Basu Model
Author(s)
Allam Mohammed Mousa Hamdan
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DOI:10.17265/1548-6583/2011.04.008
Affiliation(s)
ABSTRACT
This study aims to evaluate the level of accounting conservatism when preparing financial statements by companies listed in Kuwait Stock Exchange (KSE). In addition, the study examines the factors that affect the level of accounting conservatism in those companies with regard to company sizes, debt contracts, and the type of sector the company belongs to. To achieve these goals, the Basu (1997) model was used to measure conservatism level and the factors influencing it. The sample of the study comprises of 225 companies listed in KSE. Findings of the study showed that the KSE succeeded in forcing Kuwait companies to present a reasonable level of accounting conservatism. The study also found out that the financial statements of small companies were conservative, while those of the big ones were not. In addition, the debt contracts left an impact upon financial reports of accounting conservatism. Thus, companies with lower debts were more conservative than those of higher ones. Moreover, the financial statements of the financial sector in KSE were the most conservative.
KEYWORDS
accounting conservatism, company size, debt contracts, type of sector, financial reporting, Basu (1997) model
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