The Role of Firm-Specific Incentives and Country Factors in Explaining Voluntary IAS Adoptions: Evidence from Private Firms

Abstract

This paper investigates voluntary adoptions of International Accounting Standards (IAS) by private enterprises, and builds on prior research which posits that higher quality financial reports through IAS adoption can reduce information asymmetry and facilitate contracting with external parties. Specifically, we pursue the following questions. First, do firm-specific incentives matter in the IAS adoption decision after controlling for country-level institutional factors? Second, does the relative importance of firm vs. country factors vary across institutional settings? Using a sample of 3,722 small and medium-sized private enterprises from 56 countries, we report two primary findings. First, both firm and country factors matter in the voluntary IAS adoption decision. Second, when we focus on sub-samples of countries partitioned by the level of economic development, we find that firm factors dominate country factors in more developed countries, while in less developed countries, country factors dominate firm factors in explaining IAS adoptions. This result is consistent with the argument in Doidge et al. (Journal of Financial Economics, 86(1), pp. 1–39, 2007 Doidge, C., Karolyi, A. and Stulz, R. 2007. Why do countries matter so much for corporate governance?. Journal of Financial Economics, 86(1): 1–39. [Crossref], [Web of Science ®] , [Google Scholar]) that firm incentives are more important in explaining governance choices (including accounting) in more developed countries where the benefits from better governance are more likely to exceed the attendant costs. Collectively, our results suggest that less developed countries can enhance the benefits from IAS adoptions by developing institutions which facilitate private contracting.     

What’s new in female entrepreneurship research? Answers from the literature

Female entrepreneurship to date represents a key component of the business sector worldwide as, in 2012 more than 187 million out of 400 million entrepreneurs were women (Global Entrepreneurship Monitor 2013). In academia the gender factor in entrepreneurship emerged in the late 1970s Schwartz (Journal of Contemporary Business, 5(1), 47–76, 1976) and especially since the beginning of the new millennium a substantial growth in the investigation of this topic has been registered. Thus, the time has come to systematize the academic progress on this issue and to reflect on future research directions in order to gain deeper insights into the female entrepreneurship domain. In this vein, our paper aims to enrich the conversation on female entrepreneurship by reviewing 248 papers published in the last 14 years. In doing so, we identify and analyze the new insights that have emerged in the literature from both a managerial and a sociological perspective, thus responding to the numerous calls for a more interdisciplinary approach to the study of this topic.     

Energy consumption and economic growth: evidence from non-OPEC oil producing states

According to the US EIA (2009, www.eia.doe.gov), out of the 15 largest oil producing nations in the world, 7 are not OPEC members, namely Brazil, Canada, China, Mexico, Norway, the Russian Federation, and the United States of America (USA). This paper investigates the causal relationship between energy consumption and economic growth for these non-OPEC oil producing countries. Real GDP per capita is used to measure economic growth; whereas; energy consumption is represented by four sub-variables (electric power, oil, natural gas, and coal energy). Using a panel data covering (1969–2009), this study employs the Pedroni (Econometric Theory, 20, 597–627, 2004) approach to determine cointegration and the (Econometrica, 55, 251–276, 1987) two-step procedure to explore short and long run causal effects. The results suggest that there are long run relationships between the real GDP, labour force, real capital, oil consumption, electricity consumption, gas consumption and coal consumption. Further analyses show that real GDP and oil consumption Granger cause real gross capital formation in the short run; real gross fixed capital and electricity consumption cause oil consumption in the short run; and also oil consumption and gas consumption cause electricity consumption in the short run.     

Average employee tenure,voluntary turnover ratio,and labour productivity: evidence from Japanese firms

Using Japanese firms' data, this study shows that voluntary turnover ratio is negatively related to firm labour productivity. While recent studies have reported the negative influence of turnover on organizational performance (Kacmar et al., 2006 Kacmar, K.M., Andrews, M.C., van Rooy, D.L., Steilberg, R.C. and Cerrone, S. 2006. Sure Everyone can be Replaced… But at What Cost? Turnover as a Predictor of Unit-Level Performance. Academy of Management Journal, 49: 133–44. [Crossref], [Web of Science ®] , [Google Scholar]; Shaw et al., 2005a Shaw, J.D., Gupta, N. and Delery, J.E. 2005a. Alternative Conceptualizations of the Relationship between Voluntary Turnover and Organizational Performance. Academy of Management Journal, 48: 50–68. [Crossref], [Web of Science ®] , [Google Scholar]), they analysed only US samples. Our study contributes to researchers' efforts to generalize the relationship between voluntary turnover and organizational performance. Turnover is detrimental to labour productivity as it reduces the stock of firm-specific human capital that a firm retains. Findings suggest that firm average employee tenure mediates the relationship between voluntary turnover and labour productivity.     

A commentary on issues relating to the enforcement of International Financial Reporting Standards in the EU

Abstract

The adoption of International Financial Reporting Standards (IFRS) is supported in many countries because it may improve the quality and international comparability of financial reporting. However, these goals are less likely to be achieved without regulatory oversight that promotes rigorous and consistent use of IFRS. Consequently the European Union (EU) is requiring all member states to introduce enforcement bodies by 2005, the date of IFRS adoption in the consolidated financial statements of all EU listed companies. We review ongoing activities in France, Germany, the Netherlands and the UK in setting up and modifying enforcement bodies before 2005. We test current developments against the Fédération des Experts Comptables Européens (FEE) (2002 April 2002. “Discussion paper on enforcement of IFRS within Europe”. In Fédération des Experts Comptables Européens (FEE) April, Available at: www.fee.be/publications/main.htm [Google Scholar]) recommendations and against the principles for effective enforcement proposed in CESR Standard No. 1 on Financial Information. We present the views of people involved in financial reporting standard setting and enforcement from these countries, as well as the IASB, FEE and EFRAG, about the challenges of achieving effective uniform enforcement. Our paper will be of interest to people developing or participating in enforcement bodies, and to capital market participants who will be subject to the various regulatory regimes.     

Individual entrepreneurship,collective entrepreneurship and innovation in small business: an empirical study

The study reported in this article examines simultaneously the impact of individual entrepreneurship and collective entrepreneurship on innovation in small business. It intends to address the weakness in previous entrepreneurship research that either only focuses on the individual entrepreneur's role in innovation (Miller 1983 Management Science, 29:770-791), or only stresses the importance of collective entrepreneurship (Reich 1987 Harvard Business Review, 65 (3), 22-83; Stewart 1989). The results of structural equation modeling analysis of data from more than 200 small businesses show that both individual entrepreneur(s) and the collective contribute to innovation in small business. Analysis results also reveal the complex relationships between the two types of entrepreneurship in terms of their impact on innovation in small business. Factors that contribute to collective entrepreneurship were found to contribute to individual entrepreneurship, while factors that are often associated with individual entrepreneurship were found to have negative impact on collective entrepreneurship. Communication among members of the small business, which was found to directly contribute to collective entrepreneurship, was found to contribute to individual entrepreneur's knowledge of emerging markets, products, and technologies. In contrast, centralized decision making, which was found to have direct negative impact on innovation, was found to have negative impact on collaboration and communication. Implications of the study are discussed.     

Communications About Resilience Enhancing Activities By English Local Authorities

Abstract

The Civil Contingencies Act (2004 Civil Contingencies Act. 2004. Contingency Planning Regulations 2005, London: The Stationery Office. No. 2042 Statutory Instruments [Google Scholar]) in the United Kingdom introduced new responsibilities for public authorities regarding Business Continuity Management (BCM) and other emergency planning activities. Using content analysis techniques, this study examined thirty-four English county councils' websites to examine the extent to which this online medium communicated these new responsibilities to stakeholders. Using key-word-in-context (KWIC) and content clustering, this exploratory study found that local authorities' websites were far from generic in their web-based communications about their new Civil Contingencies Act responsibilities and BCM activities, and it reveals a number of differing website traits, motivations and orientations.     

Cooperation strategies in port-oriented bulk supply chains: aligning concept and practice

It seems intuitively obvious that firms in supply chains may have more to gain than to lose from learning to cooperate; but it is now more than two decades since Poirier [1999. Advanced Supply Chain Management. San Francisco, CA: Barrett-Koehler] and others called for cooperation in order to capture mutual gains in supply networks and even now ‘cooperation is neither common nor easy’. The simple fact is that not only are supply chains exceptionally complex but so too is the ‘process of cooperating’ – often in the context of antitrust legislation and competition policy. This paper argues that there is a critical need to rethink the principles and processes of cooperation within the broader framework of the competitive behaviour of firms and business strategy. Particularly, it suggests that the relatively recent thinking of Greenwald and Kahn [2005 Greenwald, B., and J. Kahn. 2005. Competition Demystified A Radically Simplified Approach to Business Strategy. New York, NY: Portfolio, The Penguin Group. [Google Scholar]. Competition Demystified A Radically Simplified Approach to Business Strategy. New York, NY: Portfolio, The Penguin Group] in their ‘radically simplified approach to business strategy’ offers sound conceptual insights into cooperation and cooperative strategies for firms not only in markets but also in chains. Furthermore, it notes that the analytical framework for cooperation and cooperative strategies which the authors develop is far removed from the notion of cooperation as ‘commitment and trust and shared thinking’ and from ‘buyer/seller reciprocity’ and ‘collaborative attitudes’ which tend to underwrite much contemporary thinking and research. The paper also argues that the Greenwald and Kahn framework – its single intelligence model of cooperation and cooperative strategies – resonates with real-world relevance, at least for particular supply chains. The paper focuses attention on research into globally significant export coal chains from major east coast Australian ports and in brief case studies finds substantial alignment between concept and practice.     

Cultural distance in international business and management: from mean-based to variance-based measures

Extant practice in international management is to measure cultural distance as a nation-to-nation comparison of country means on cultural values, thereby ignoring the cultural variation that exists within countries. We argue that these traditional mean-based measures of cultural distance should take within-country cultural variation into account. Therefore, we propose the use of variance-based measures of cultural distance. To illustrate our argument, we examine total US foreign affiliate sales in more than 40 host countries over the 1983–2008 period, complemented with data from the World Values Survey. We analyze the effects of three cultural distance measures: the Kogut and Singh (1988 Kogut, B., and Singh, H. (1988), ‘The Effect of National Culture on the Choice of Entry Mode,’ Journal of International Business Studies, 19, 411–432.[Crossref], [Web of Science ®] , [Google Scholar]) mean-based index of cultural distance, the Kogut and Singh (1988 Kogut, B., and Singh, H. (1988), ‘The Effect of National Culture on the Choice of Entry Mode,’ Journal of International Business Studies, 19, 411–432.[Crossref], [Web of Science ®] , [Google Scholar]) index conditioned by host-country cultural variation and a variance-based measure that takes into account both home- and host-country cultural variation. Our findings indicate that, when within-country cultural variation is taken into account, the explanatory power of the Kogut and Singh (1988 Kogut, B., and Singh, H. (1988), ‘The Effect of National Culture on the Choice of Entry Mode,’ Journal of International Business Studies, 19, 411–432.[Crossref], [Web of Science ®] , [Google Scholar]) index is substantially decreased. In addition, our variance-based measure of cultural distance outperforms the Kogut and Singh (1988 Kogut, B., and Singh, H. (1988), ‘The Effect of National Culture on the Choice of Entry Mode,’ Journal of International Business Studies, 19, 411–432.[Crossref], [Web of Science ®] , [Google Scholar]) measure in the explanation of foreign US sales. We therefore suggest to move from mean-based to variance-based measures of cultural distance, thereby taking the cultural variation within countries into account.     

GRAS versus minimizing absolute and squared differences: a comment

Junius and Oosterhaven (2003) Junius, T. and Oosterhaven, J. 2003. The solution of updating or regionalizing a matrix with both positive and negative entries. Economic Systems Research, 15: 87–96. [Taylor & Francis Online] [Google Scholar] developed the GRAS algorithm that minimizes the information gain when updating input–output tables with both positive and negative signs. Jackson and Murray (2004) Jackson, R. W. and Murray, A. T. 2004. Alternative input–output matrix updating formulations. Economic Systems Research, 16: 135–148. [Taylor & Francis Online] [Google Scholar], however, claim that minimizing squared differences in coefficients produces a smaller information gain, which is theoretically impossible. In this comment, calculation errors are sorted out from differences in measures, and it is shown that the information gain needs to be taken in absolute terms when increasing and decreasing cell values occur together. The numerical results show that GRAS outperforms both sign-preserving alternatives in all but one comparison of lesser economic importance. Moreover, as opposed to the result of Jackson and Murray, they show that minimizing absolute differences consistently outperforms minimizing squared differences, which overweighs large errors in small coefficients.     

The impacts of gender inequality in education on economic growth in Tunisia: an empirical analysis

The positive contribution of women’s education to the economy and society has long been known in many countries, particularly in developing countries, to attract more attention. A large number of literatures on women’s education clearly suggest that educating a woman is equivalent to educating a family and that this woman is better educated than her counterparts, men, in many respects. The low level of education of women in Muslim countries, most of which are in developing countries. The increase in the level of education depends on the elimination of gender inequalities in education. Muslim countries must use all their resources to achieve their economic development goals. Women’s participation in the economy is a major economic resource that is not widely used in Muslim countries. The literature (Dollar and Garti in Gender inequality, income, and growth: are good times good for women? World Bank Working Paper, 21–2 1999; Barro in The Contribution of Human and Social Capital to Sustained Economic Growth and Well Being, Canada Government, Portage 2001; Schltz 2002; Klasen 2002; Knowles et al. in Oxf. Econ. Pap. 54 118–149 2002) suggests that gender equality has a positive effect on economic growth. Taking into account Muslim countries, it can reasonably be argued that the rate of the gender effect on economic growth is higher in developing countries. This paper analyzes the impact of gender inequality in education on economic growth for tunisia will be explored, using econometric techniques. The document will take into account all variables of primary school graduation, obtaining a high school diploma, obtaining a high school diploma and obtaining a University degree with economic growth will be examined in detail for the period 1970–2009. At this level Women’s contribution to the economy is threefold. The first is that the increase in the level of human capital, as a result, decrease the fertility rate of women. The second argument is that the infant mortality rate could decrease by decreasing the fertility rate of women. Third, raising the level of education of women can affect the level of education of the next generation positively. In this context, in order to understand the long-term relationships between these variables, i.e. gender inequality in education and economic growth, a co-integration approach will be applied. The empirical results show that there is a long-term relationship between these variables.     

Experiential regret in service failure: The role of service justices

ABSTRACT

Regret is so common as to be the second most frequently named emotion in a study of the use of emotions in everyday language (Shimanoff, 1984 Shimanoff, S. B. (1984). Commonly named emotions in everyday conversations. Perceptual and Motor Skills, 58, 514. doi:10.2466/pms.1984.58.2.514[Crossref], [Web of Science ®] , [Google Scholar]). Regret is a negative, cognitively based emotion that we experience when realizing or imagining that our present situation would have been better had we acted differently (Zeelenberg, 1999 Zeelenberg, M. (1999). The use of crying over spilled milk: A note on the rationality and functionality of regret. Philosophical Psychology, 12, 325–340. doi:10.1080/095150899105800[Taylor & Francis Online], [Web of Science ®] , [Google Scholar]). Meanwhile, complaint handling takes an important role in raising the retention rate of the customers who experience service problems (Hart, Heskett, & Sasser, 1990 Hart, C. W. L., Heskett, J. L., & Sasser, W. E., Jr. (1990). The profitable art of service recovery. Harvard Business Review, 68(4), 148–156.[PubMed], [Web of Science ®] , [Google Scholar]). Customers anticipate that enterprises will remedy their service failure. The complaining process enhances the relationship between dissatisfied customers and enterprises (Chebat & Slusarczyk, 2005 Chebat, J. C., & Slusarczyk, W. (2005). How emotions mediate the effects of perceived justice on loyalty in service recovery situations: An empirical study. Journal of Business Research, 58, 664–673. doi:10.1016/j.jbusres.2003.09.005[Crossref], [Web of Science ®] , [Google Scholar]). One of the strategies to retain customers is to recover justice from failures (Blodgett, Hill, & Tax, 1997 Blodgett, J. G., Hill, D. J., & Tax, S. S. (1997). The effects of distributive, procedural, and interactional justice on postcomplaint behavior. Journal of Retailing, 73(2), 185–210. doi:10.1016/s0022-4359(97)90003-8[Crossref], [Web of Science ®] , [Google Scholar]). This study intended to explore the impact of customers’ experiential regret in service failure on customers’ behavioral intention and investigate whether the service justice perceived by customers moderates the relationship between these two.     

Technological change and timing reductions in greenhouse gas emissions

In 2007 Nicholas Stern’s Review (in Science 317:201–202, 2007) estimated that global GDP would shrink by 5–20% due to climate change which brought forth calls to reduce emissions by 30–70% in the next 20 years. Stern’s results were contested by Weitzman (in J Econ Lit XLV(3):703–724, 2007) who argued for more modest reductions in the near term, and Nordhaus (in Science 317:201–202, 2007) who questioned the low discount rate and coefficient of relative risk aversion employed in the Stern Review, which caused him to argue that ‘the central question about global-warming policy—how much how, how fast, and how costly—remain open.’ We present a simulation model developed by Färe et al. (in Time substitution with application to data envelopment analysis, 2009) on intertemporal resource allocation that allows us to shine some light on these questions. The empirical specification here constrains the amount of undesirable output a country can produce over a given period by choosing the magnitude and timing of those reductions. We examine the production technology of 28 OECD countries over 1992–2006, in which countries produce real GDP and CO₂ using capital and labor and simulate the magnitude and timing necessary to be in compliance with the Kyoto Protocol. This tells us ‘how fast’ and ‘how much’. Comparison of observed GDP and simulated GDP with the emissions constraints tells us ‘how costly’. We find these costs to be relatively low if countries are allowed reallocate production decision across time, and that emissions should be cut gradually at the beginning of the period, with larger cuts starting in 2000.     

The influence of cross-cultural differences on job interview selection decisions

How the interview process affects foreign-born job candidates has received scant attention in recent research literature (Huffcutt 2011 Huffcutt, A.I. (2011), ‘An Empirical Review of the Employment Interview Construct Literature,’ International Journal of Selection and Assessment, 19, 62–81.[Crossref], [Web of Science ®] , [Google Scholar]), even though the issue should be growing in importance given the massive influx of qualified migrants entering developed countries. This paper examines the job interview through the lens of national culture and argues that cross-cultural differences between interviewer and interviewee can affect interview judgement and evaluation. Drawing upon the literatures in cross-cultural research and social psychology, this paper presents a model of cross-cultural differences on interview outcomes. In so doing, this conceptual study advances theory that underpins the employment selection process of foreign-born job candidates, and also provides a platform on which future empirical research may be based.     

Augmenting the Input–Output Framework for ‘Common Pool’ Resources: Operationalising the Full Leontief Environmental Model

In its initial formulation, the full Leontief (1970) Leontief, W. 1970. Environmental repercussions and the economic structure: an input–output approach. Review of Economics and Statistics, 52: 262–277. [Crossref], [Web of Science ®] [Google Scholar] environmental model augments the conventional Input–Output (IO) table by introducing pollution generation and separately identified pollution elimination sectors. Essentially it extends IO analysis to incorporate the use of a ‘common pool’ resource. Subsequent literature has either been analytical in nature or has concentrated on pollution generation but not cleaning activity. In this paper we generate an empirical full Leontief environmental IO system, based on augmenting the existing Scottish IO tables through endogenising waste generation and waste disposal activity. Due to weaknesses in data, our empirical results need to be treated with some caution. However, the construction of the extended IO system and the interpretation of the output and price multiplier results raise a number of interesting practical and conceptual issues. The analysis undertaken here can be extended to other ‘common pool’ resources such as the use of highways and irrigation systems.     

Contrasting local responses to globalization: the case of volume yacht manufacturing in Europe

This paper is concerned with contrasting the impact of globalization pressures on industrial development in particular localities, with specific reference to the relative performance of regional clusters. A multiple case study approach is adopted in order to examine the decline of volume yacht manufacturing in a long-established English cluster and to compare its responses to globalization with those of major competitors located in other parts of Europe. The case study opens with an analysis of three sector-specific drivers of globalization that have exercised a decisive impact on the sector over the last three decades. In the main analytical section, two alternative approaches to the analysis of clusters (Porter 1990 Porter, ME. 1990. The Competitive Advantage of Nations, London: Macmillan. [Crossref] , [Google Scholar], 2000 Porter, ME. 2000. Location, competition, and economic development: local clusters in a global economy. Economic Development Quarterly, 14(1): 15–34. [Crossref], [Web of Science ®] , [Google Scholar], Best 2001 Best, M. 2001. The New Competitive Advantage, Oxford: Oxford University Press. [Crossref] , [Google Scholar]) are applied to the empirical material. The application of Porter's ‘diamond’ framework suggests some distinctive performance-related characteristics, while Best's ‘cluster dynamics’ model provides a more sophisticated explanation of the differential responses and outcomes identified in the English case. The implications for policy are that cluster-level outcomes may be predicated on the internal dynamics of their respective ‘entrepreneurial firms’, and that regional development initiatives would benefit from conceptual and empirical studies that can better address the historical and spatial complexity of the underlying processes.     

The performance effects of major workforce reductions: longitudinal evidence from North America

This paper investigates the performance effects of major job cuts.1 1 Like Wayhan and Werner (2000 Wayhan, V. and Werner, S. 2000. The Impact of Workforce Reductions on Financial Performance: A Longitudinal Perspective. Journal of Management, 26: 341–63. [Crossref] , [Google Scholar]), we interchangeably use the expressions ‘workforce reduction’ and ‘job cuts’ instead of the broad concept of ‘downsizing’ which is subject to multiple confusing definitions (DeWitt, 1998 DeWitt, R.L. 1998. Firm Industry and Strategy Influences on Choice of Downsizing Approach. Strategic Management Journal, 19: 59–79.  [Google Scholar]). Using data from Compustat S&P database, we examined the longitudinal impact of workforce reductions on labour productivity and operational indebtedness of 239 US and Canadian companies. Repeated measures analysis showed that firms that substantially cut jobs failed to improve their labour productivity and their operational indebtedness. Then, taken a step further, statistical analysis surprisingly revealed that firms that cut the highest proportions of their workforce had a significant deterioration of their operational indebtedness and a non-significant change of their labour productivity. These results call into question the economic legitimacy of major workforce reductions increasingly institutionalized to the detriment of the strategic approach of HRM.     

Human resource systems and employee performance in Ireland and the Netherlands: a test of the complementarity hypothesis

A central claim of strategic HRM is the notion that the way a firm manages its workforce affects its corporate performance. In particular, ‘high performance human resource management’, a systematic approach toward HR management consisting of internally consistent HR dimensions that develop the skill and motivation of the workforce, is considered to contribute to the ‘bottom-line’ of companies. The benefits are attributed generally to ‘complementarities’ among the constituent dimensions. In the theoretical part of this paper we distinguish between three different processes resulting in such complementarities: reinforcement, flanking and compensation. These different processes are exemplified for five areas of high performance human resource management, incentives systems, training, sharing arrangements, guidance and selective recruitment. In the empirical part of this paper we examine whether the effect at the employee level can be traced to the complementary relationships among the five high performance HR dimensions. The core hypothesis to be tested in this study is that the complementarity effect of the high performance HR management system enhances employee performance over and above the sum of the effects of the five practices. This complementarity hypothesis is tested using a methodology for the test of systems effects suggested by Ichniowski et al. (1997 Ichniowski, C., Shaw, K. and Prennushi, G. 1997. The Effects of Human Resources Management Practices on Productivity: A Study of Steel Finishing Lines. The American Economic Review, 87(3): 291–314. [Web of Science ®] , [Google Scholar]). The data come from a matched establishment survey in two European countries, Ireland and the Netherlands. These datasets comprise data from nearly 400 establishments. Key findings are that the complementarity hypothesis is fully supported by the Irish data but rejected by the Dutch data.     

Special Issue on Tax Research

Abstract

This paper is motivated by the links that continue to be forged between security pricing and accounting, building on recent findings that firms tend to be asymmetrically conservative in the timeliness of earnings recognition. The evidence is that firms in the European Union tend to recognise unrealised losses more quickly in their earnings than unrealised gains (Giner and Rees, 2001 Giner, B. and Rees, W. 2001. On the asymmetric recognition of good and bad news in France, Germany and the United Kingdom. Journal of Business Finance and Accounting, 28(9/10): 1285–1331.  [Google Scholar]; Raonic et al., forthcoming), and there is evidence of even greater accounting conservatism in the USA (Basu, 1997 Basu, S. 1997. The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting and Economics, 24: 3–37. [Crossref], [Web of Science ®] , [Google Scholar]; Ball et al., 2000 Ball, R., Kothari, S. P. and Robin, A. 2000. The effect of international institutional factors on properties of accounting earnings. Journal of Accounting and Economics, 29: 1–51. [Crossref], [Web of Science ®] , [Google Scholar]; Givoly and Hayn, 2000 Givoly, D. and Hayn, C. 2000. The changing time-series properties of earnings, cash flows and accruals: has financial reporting become more conservative?. Journal of Accounting and Economics, 29: 287–320. [Crossref], [Web of Science ®] , [Google Scholar]). This paper investigates whether the Czech market exhibits conformity with the behaviour that has been documented elsewhere by examining the earnings/returns relationship, focusing to begin with on the impact of losses on earnings response coefficients and then considering the asymmetric timeliness of income recognition in the Czech market. The findings indicate that the Czech market is similar to more developed markets, at least in one respect: there is statistically significant evidence of different market effects of profits and losses, in that profits are more persistent than losses. However, contrary to the findings in more developed markets, there is no statistically significant evidence of earnings conservatism in the Czech market. These results are most probably due to the continuing influence of restrictive tax regulations that mitigate any tendency towards conservatism, as well as the transitional nature of the economy. A further reason is likely to be that the regulatory environment in the Czech Republic is close to the kind of stakeholder corporatism that is described by Ball et al. (2000) Ball, R., Kothari, S. P. and Robin, A. 2000. The effect of international institutional factors on properties of accounting earnings. Journal of Accounting and Economics, 29: 1–51. [Crossref], [Web of Science ®] , [Google Scholar], who show that conservatism tends to be less pronounced in such regimes where there are fewer managerial incentives to bias current earnings. In conclusion, if changes in market prices signal good news and bad news about future risky outcomes, there is no evidence of asymmetry in the Czech market in accounting for such risks.