Disclosure, conservatism and the cost of equity capital : a review of the foundation literature

In this review piece, we survey the literature on the cost of equity capital implications of corporate disclosure and conservative accounting policy choice decisions with the principle objective of providing insights into the design and methodological issues, which underlie the empirical investigations. We begin with a review of the analytical studies most typically cited in the empirical research as providing a theoretical foundation. We then turn to consider literature that offers insights into the selection of proxies for each of our points of interest, cost of equity capital, disclosure quality and accounting conservatism. As a final step, we review selected empirical studies to illustrate the relevant evidence found within the literature. Based on our review, we interpret the literature as providing the researcher with only limited direct guidance on the appropriate choice of measure for each of the constructs of interest. Further, we view the literature as raising questions about both the interpretation of empirical findings in the face of measurement concerns and the suitability of certain theoretical arguments to the research setting. Overall, perhaps the message which is most clear is that one of the most controversial and fundamental issues underlying the literature is the issue of the diversifiability or nondiversifiability of information effects.

Conservatism, disclosure and the cost of equity capital

This study seeks insights into the economic consequences of accounting conservatism by examining the relation between conservatism and cost of equity capital. Appealing to the analytical and empirical literatures, we posit an inverse relation. Importantly, we also posit that the strength of the relation is conditional on the firm’s information environment, being the strongest for firms with high information asymmetry and the weakest (potentially negligible) for firms with low information asymmetry. Based on a sample of US-listed entities, we find, as predicted, an inverse relation between conservatism and the cost of equity capital, but further, that this relation is diminished for firms with low information asymmetry environments. This evidence indicates that there are economic benefits associated with the adoption of conservative reporting practices and leads us to conclude that conservatism has a positive role in accounting principles and practices, despite its increasing rejection by accounting standard setters.

Sun, sea, sex, sand and conservatism in the Australian television soap opera

A recent issue of Young People Now (November 1995) mentioned the new (UK) television soap opera Hollyoaks by Phil Redmond, which raises the issue of the role of ‘soap operas’ (hereafter referred to as soaps) in the daily lives of young people. The term ‘soap’ originates with the sponsorship of radio and television programmes by companies such as Proctor and Gamble who in America in 1932 used a daytime radio domestic comedy, The Puddle Family to advertise Oxydol, a washing powder. The first British television soap was The Grove Family (BBC 1954-7) was followed by Emergency Ward Ten (ATV 1957-67), Coronation Street (Granada Television 1960-present) and Eastenders (BBC 1985-present). Australian soaps are especially popular in Britain and of potential interest to those who work with young people, because they have a high proportion of youthful looking actors and actresses and frequently depict scenes involving young people and apparent ‘real’ teenage dilemmas. On one level it may be commendable that actors who are young(ish) somewhere between the ages of 14 and 25 play roles that are ostensibly about young people and their alleged problems. However, the casting of young, largely unknown, actors reflects more the political economy of soaps in their relative cheapness and dispensability, rather than any genuine attempt to create an oppositional text for, about and by young people (Paterson 1986).

Karyotypic conservatism in the suborder Feliformia (Order Carnivora)

Multidirectional comparative chromosome painting was used to investigate the karyotypic relationships among representative species from three Feliformia families of the order Carnivora ( Viverridae, Hyaenidae and Felidae). Complete sets of painting probes derived from flow-sorted chromosomes of the domestic dog, American mink, and human were hybridized onto metaphases of the spotted hyena (Crocuta crocuta, 2n = 40) and masked palm civet (Paguma larvata, 2n = 44). Extensive chromosomal conservation is evident in these two species when compared with the cat karyotype, and only a few events of chromosome fusion, fission and inversion differentiate the karyotypes of these Feliformia species. The comparative chromosome painting data have enabled the integration of the hyena and palm civet chromosomes into the previously established comparative map among the domestic cat, domestic dog, American mink and human and improved our understanding on the karyotype phylogeny of Feliformia species. Copyright (C) 2005 S. Karger AG, Basel.

Conservatism and Revolution: The All-Russian Union of Landowners, 1916-1918

Rendle, Matthew, 'Conservatism and Revolution: The All-Russian Union of Landowners, 1916-1918', Slavonic and East European Review (2006) 84(3) pp.481-507 RAE2008

Decadent Conservatism: Politics and Aesthetics in The Senate

The relationship between late-Victorian Decadence and Aestheticism and politics has long been vexed. This article explores the hitherto under-explored confluence of conservatism and avant-garde literature in the period by introducing The Senate, a Tory-Decadent journal that ran from 1894-7. While Decadent authors occupied various political positions, this article argues that The Senate offers a crucial link between conservatism and Decadence The article presents the journal in its political and publishing context, outlining its editorial position on such issues as the Liberal Unionist-Conservative coalition governments, Britain's relationship with Europe and the threat of ‘State Socialism’, as well as its valorisation of Bollingbroke and eighteenth-century Toryism, and its relationship to, and difference from, key Decadent journals the Yellow Book and The Savoy. It then goes on to articulate its relationship to Decadence by focussing on the presence of Paul Verlaine in its pages and its vitriolic response to the press coverage of Oscar Wilde's trials. The article concludes by exploring the surprising wake of The Senate, briefly tracing the editors' influence in the development of Modernism and links with the journal BLAST.

On the conservatism of post-Jungian criticism: competing concepts of the symbol in Freud, Jung and Walter Benjamin

The renewed interest in analytical psychology by academics working in the humanities has led to the emergence of a post-Jungian field of cultural criticism, at the theoretical core of which stands Jung's theory of symbolism. This article examines the centrality of symbolism to both Freud and Jung's psychology and explains how the differing concepts of the symbol lead to their divergent theories of interpretation in psychology and art criticism. Acknowledging the advantages of Jung's more expansive account of the symbol, it argues that Walter Benjamin's critical engagement with Jung nonetheless provides a useful correction to the problematic conservatism inherent to his concept of the symbol and its contemporary application.

Information Asymmetry and Accounting Conservatism under IFRS Adoption

LaFond and Watts (2008) provide evidence that information asymmetry might be a determinant of accounting conservatism. One implication of their paper is that regulators trying to reduce information asymmetry by lowering the level of accounting conservatism might be wrong. However, there is a trend in moving away from conservative accounting. The typical example is IFRS adoption. Therefore, this paper studies information asymmetry and accounting conservatism under IFRS adoption. The results show that the level of accounting conservatism decreases after mandatory IFRS adoption, but the adoption of IFRS is likely to weaken the relationship between information asymmetry and accounting conservatism. Moreover, this paper investigates how the change of accounting conservatism under IFRS is related to the change in information environment. The finding shows that accounting conservatism increases information environment, supporting the idea that, by providing comparatively credible information, conservative accounting is beneficial to the information environment.

Extreme host plant conservatism during at least 20 million years of host plant pursuit by oak gallwasps

Diversification of insect herbivores is often associated with coevolution between plant toxins and insect countermeasures, resulting in a specificity that restricts host plant shifts. Gall inducers, however, bypass plant toxins and the factors influencing host plant associations in these specialized herbivores remain unclear. We reconstructed the evolution of host plant associations in Western Palaearctic oak gallwasps (Cynipidae: Cynipini), a species-rich lineage of specialist herbivores on oak (Quercus). (1) Bayesian analyses of sequence data for three genes revealed extreme host plant conservatism, with inferred shifts between major oak lineages (sections Cerris and Quercus) closely matching the minimum required to explain observed diversity. It thus appears that the coevolutionary demands of gall induction constrain host plant shifts, both in cases of mutualism (e.g., fig wasps, yucca moths) and parasitism (oak gallwasps). (2) Shifts between oak sections occurred independently in sexual and asexual generations of the gallwasp lifecycle, implying that these can evolve independently. (3) Western Palaearctic gallwasps associated with sections Cerris and Quercus diverged at least 20 million years ago (mya), prior to the arrival of oaks in the Western Palaearctic from Asia 5-7 mya. This implies an Asian origin for Western Palaearctic gallwasps, with independent westwards range expansion by multiple lineages.