Measuring Accounting Conservatism in Financial Reports: A Comparison Between France and the United Kingdom

Accounting conservatism is necessary for more reliability and verifiability in financial reports. Studies have reported mixed results concerning the comparative level of conservatism across countries, especially the celebrated comparison between the common law and code law countries. Therefore, this study is an attempt to reinvestigate accounting conservatism in French and UK companies, using 110 French companies and 105 UK companies during the period 2011-2019. Accounting conservatism was measured depending on the asymmetric accruals-to-cash flows because it does not rely on market information and its fluctuations. The results document a greater level of conservatism in UK companies compared to French companies, which confirms the findings of several previous studies concluding that companies in common law countries are more conservative than those from code law countries. The results of this study have many implications for different parties affecting the financial information environment, especially auditors who must continuously monitor conservatism practices in financial reports to maintain an adequate level.