Graduation Year

Spring 2013

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

George Batta

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2013 Alexander H. Perkins

Abstract

This paper examines the relationship between the accounting conservatism construct and the prediction of corporate bankruptcy. Prior research has explored the link between accounting quality and bankruptcy prediction, but it has not examined the relationship between accounting conservatism and bankruptcy prediction. This study hypothesizes that the inclusion of conservatism metrics in the bankruptcy hazard model estimation process should have an incremental effect on the predictive ability of bankruptcy hazard models. This paper finds that the inclusion of conservatism metrics does enhance the predictive power of bankruptcy hazard models for certain subgroups of a population partitioned on the basis of accounting conservatism metrics.

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