Accounting conservatism and COVID-19 restriction measures: An analysis in Latin America

ABSTRACT The study analyzes the relationship between the restrictive measures adopted by Latin American countries to combat COVID-19 and the level of corporate conservatism. Considering that, to date, there is no empirical evidence examining the relationship between restrictive measures and corporate conservatism, the scarcity of previous studies in this area highlights the originality of this work. This study provides insights for policymakers since understanding how restrictive measures affect accounting practices can inform decisions related to crisis management. In addition, investors and managers can benefit from the study by understanding how the measures implemented by public agents and conservatism are interconnected. Understanding the dynamics of accounting conservatism in the face of the economic and social challenges generated by the COVID-19 pandemic is essential to guide more adaptive and effective accounting practices in crisis contexts, promoting transparency and reliability of accounting information for the benefit of stakeholders. The study sample includes countries with the leading stock exchanges in Latin America (Argentina, Brazil, Chile, Colombia, Mexico, and Peru). Data were obtained from Thomson Reuters Eikon and the Oxford COVID-19 Government Response Tracker (OxCGRT) from 2014 to 2021, and analyses were performed using regressions with panel data. The main results indicate that companies in less restrictive countries presented a more conservative stance in their financial statements. However, there was no evidence that the restrictive measures significantly impacted conservatism. Thus, this study contributes to the literature in the area by providing the first empirical evidence of the effect of COVID-19 restrictive measures on the level of accounting conservatism.