The Impact of the Covid-19 Pandemic Crisis on Accounting Conservatism in Algerian Companies

Abstract

Several studies argued that companies are more conservative during scandals and downturns as a means to provide information about uncertain situations and big economic losses, and that more conservative companies experience fewer difficult times due to recessions. Therefore, this paper aims to investigate the impact of the Covid-19 pandemic on accounting conservatism in Algerian companies. The research methodology relies on the model of Ball and Shivakumar (2005) as a measure of accounting conservatism, then introduces the Covid-19 pandemic as a dummy variable, and finally controls the model by company size, leverage, and return on equity. The study included 600 firm-year observations for 150 Algerian companies from 2018 to 2021, where the study period was divided into the pre-Covid-19 period (2018-2019) and the Covid-19 period (2020-2021). The results indicate that Algerian companies are generally conservative. However, they showed a very low level of conservatism during the Covid-19 period compared to very conservative financial information during the pre-Covid-19 period. Overall, this study has empirical implications for accounting standard-setters, auditors, and institutional regulators.