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Wage and accounting conservatism: Evidence from China/ Yongjian Shen

By: Contributor(s): Material type: TextTextSeries: China Journal of Accounting Studies ; Volume,1 , number 1 ,Taylor and Francis: Oxon, 2013Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
ISSN:
  • 2169-7221
Subject(s): Online resources: Summary: Whereas employees want their wages to stay at a sustainably high level, managers want to cut labor costs. This contrast may lead to different accounting conservatism preferences between the two parties. We use Khan and Watts’ (2009) C score model to examine the effects of wage amount and rigidity on accounting conservatism. We find that the degree of accounting conservatism is positively correlated with (1) the amount of wages, (2) the rigidity of wages and (3) the number of employees. In addition, our results also show that conservatism has increased since the enactment of the Law of the People’s Republic of China on Employment Contracts in 2008. This paper connects two different fields (wage and accounting conservatism) and expands on contracts related to the conservatism raised by Watts (2003).
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Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Journal Article Journal Article Main Library - Special Collections HF5601 CHI (Browse shelf(Opens below)) Vol 1, No 1 pages32-47 SP17843 Not for loan For In-house use only

Whereas employees want their wages to stay at a sustainably high level, managers want to cut labor costs. This contrast may lead to different accounting conservatism preferences between the two parties. We use Khan and Watts’ (2009) C score model to examine the effects of wage amount and rigidity on accounting conservatism. We find that the degree of accounting conservatism is positively correlated with (1) the amount of wages, (2) the rigidity of wages and (3) the number of employees. In addition, our results also show that conservatism has increased since the enactment of the Law of the People’s Republic of China on Employment Contracts in 2008. This paper connects two different fields (wage and accounting conservatism) and expands on contracts related to the conservatism raised by Watts (2003).

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