While conditional conservatism is useful to investors and creditors for various reasons, it potentially reduces the usefulness of GAAP earnings for valuation by investors. Consistent with this conjecture, we find evidence suggesting that conditional conservatism reduces GAAP earnings...

Overconfident CEOs are more willing to initiate investment projects that require experimentation, yet tend to defer responding to the bad news when the project is not performing as planned. Accounting conservatism accelerates the recognition of the bad news and its dissemination to gatekeepers,...