Accounting Conservatism in Emerging Markets: Comparative Evidence from Nigeria and South Africa
DOI:
https://doi.org/10.61143/umyu-jafr.8(1)2025.005Keywords:
Conditional Conservatism, Basu Model, Financial Reporting, Sub-Saharan Africa, Academic PerformanceAbstract
This study examined the degree and variation of conditional accounting conservatism between Nigeria and South Africa using the Basu (1997) asymmetric timeliness model. It aimed to determine whether earnings reflected bad news more promptly than good news in the two leading Sub-Saharan African economies and whether such conservatism was systematically influenced by country-specific factors. Panel data from listed manufacturing firms covering the period 2012 to 2023 were employed, and fixed and random effects regressions were estimated using robust standard errors. Diagnostic tests such as the Ramsey RESET, Breusch-Pagan LM, and Portmanteau tests were conducted to ensure the validity of the models. The results revealed that Nigerian firms exhibited statistically significant conditional conservatism, whereas South African firms showed no such evidence. Furthermore, interaction terms in the extended model did not indicate statistically significant cross-country differences, although the direction of effects suggested stronger conservatism in Nigeria. These findings implied that institutional, regulatory, and governance frameworks likely influenced conservative financial reporting practices. The study recommended regional policy coordination to enhance the comparability and credibility of financial statements.
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