Geopolitical risk and accounting conservatism: does financial reporting opacity matter? Evidence from an emerging market

As global markets increasingly navigate extreme external shocks, understanding how macroeconomic turbulence reshapes corporate financial reporting strategies remains a critical challenge for stakeholders. This study investigates the empirical relationship between macro-level geopolitical risk (GPR) and accounting conservatism (AC), while examining the moderating role of financial reporting opacity (FRO) in an emerging market setting. Using a panel data sample of 100 non-financial Egyptian Exchange companies spanning 2018–2024 (700 firm-year observations), the analysis employs a random-effects panel regression with year- and firm-clustered standard errors to accommodate the macro-level nature of the GPR index. The findings provide robust empirical evidence that GPR is positively associated with AC. Furthermore, FRO acts as a key moderating factor, significantly strengthening this positive association. This demonstrates that under heightened macro-geopolitical exposure, accounting conservatism strongly aligns with strategic shock absorption and compensatory signaling. The demand for conservative reporting increases more steeply in response to GPR when firm-level financial information is ambiguous, bridging critical information gaps. These empirical associations remain consistent across sensitivity and endogeneity specifications. Overall, the findings offer vital implications for regulators enhancing transparency mandates during crises, and for investors utilizing conservatism as an indicator of managerial prudence in volatile economies.