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Our analyses show the validity of applying Basu’s conservatism model to French companies, regardless of their size and auditing firms. We also confirmed the overall improvement in the conservatism aspect of accounting earnings published by French listed companies during the 1990s, as validated by Ball et al. (2000) and by Giner and Rees (2001) for certain years using a smaller sample.

Various arguments have been presented in the literature to explain the improvement of earnings timeliness and conservatism; for example, the size of the firm, listing on international markets, the presence of international investors or being audited by Big Five firms. Size is the only significant explanatory variable found in this study: as in results obtained from US samples, small firms tended to be more conservative than large ones in France.

The limitation of this study is that it relies on Basu (1997) for measuring timeliness and conservatism. Dietrich et al. (2003) demonstrate that Basu method results in misspecification. They believe that results obtained in previous studies are attributable to the estimation procedure rather than to conservatism.

In future studies, it will be interesting to develop and test other possible corporate and/or institutional factors relating to accounting earnings properties. Once the problem of data availability is solved, further research into the relationship between earnings properties and a company’s degree of international financing will also be highly valuable.


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Ball, R., Robin, A. and Wu, J.S. (2003), ‘‘Incentives versus standards: properties of accounting income in four East Asian countries’’, Journal of Accounting and Economics, Vol. 36 No. 1-3, 235-70.

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Basu, S. (2001), ‘‘Discussion of on the asymmetric recognition of good and bad news in France, Germany and the United Kingdom’’, Journal of Business Finance and Accounting, Vol. 28 No. 9/10, pp. 1333-49.

Basu, S., Hwang, L.-S. and Jan, C.L. (2001a), ‘‘Auditor conservatism and quarterly earnings’’, working paper, Baruch College and California State University-Hayward.

Basu, S., Hwang, L.-S. and Jan, C.L. (2001b), ‘‘Differences in conservatism between big eight and non-big eight auditors’’, working paper, Baruch College and California State University- Hayward.

Beaver, W., Lambert, R. and Morse, D. (1980), ‘‘The information content of security prices’’, Journal of Accounting and Economics, Vol. 2, pp. 3-28.

Becker, C.L., Defond, M.L., Jiambolvo, J. and Subramanyam, K.R. (1998), ‘‘The effect of audit quality on earnings management’’, Contemporary Accounting Research, Vol. 15 No. 1, pp. 1-24.

Colasse, B. and Standish, P. (1998), ‘‘De la r´eforme 1996-1998 du dispositif fran¸cais de normalisation comptable’’, Comptabilite´ Controˆle Audit, Vol. 4 No. 2, pp. 5-27.

Dietrich, R., Muller, K.A. and Riedl, E.J. (2003), ‘‘Using stock returns to determine ‘‘bad’’ versus ‘‘good’’ news to examine the conservatism of accounting earnings’’, working paper, The Ohio State University, The Pennsylvania State University and Harvard Business School.

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