Measures of Accounting Conservatism: A Construct Validity Perspective

Accounting conservatism has been the subject of intensive empirical research in the past decade. To date five key measures of conservatism have emerged in the literature. However, there have been few studies that have examined, directly or tangentially, whether the applications of these measures produce facts or artefacts. In this paper we consider this issue from the perspective of construct validity. We describe each of the five measures and, within the constraints imposed by the limited and mixed relevant evidence, we consider the measures against four of the sub-validities of construct validity. While the available evidence is insufficient to conclude on construct validity, the analysis of this paper nevertheless suggests that the construct validity of the five existing measures of conservatism is weak. We conclude the paper with a consideration of the challenges of measuring conservatism facing accounting researchers and suggestions for further research.