Accounting Conservatism in Corporate Financial Reporting in Saudi Arabia: An Empirical Study

Abstract

This study aims to discuss the accounting conservatism in Saudi companies during the period from 2001 to 2005. The study examines the relation between the degree of accounting conservatism and (1) profitability, (2) company size, (3) company sector, (4) company debt and (5) establishment of Saudi Capital Market Authority.
Findings of the study indicate a low degree of accounting conservatism in Saudi companies. The results of the study reveal that the size of a company generally does not affect the accounting conservatism rate in Saudi companies. The findings of the study show that the banking sector has lower rate of conservatism than other sectors in Saudi market. The findings also show that a company debt does not affect its rate of accounting conservatism. Finally, the results of the study statistically prove that companies have turned to be more conservative after the establishment of the Capital Market Authority.
The study recommends conducting more research on the quality of financial reports within the different sectors of the Saudi market.