Assessing accounting conservatism in the property and the food, beverage and tobacco (FBT) industries in the Philippines

Date of Publication


Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Accountancy


Ramon V. Del Rosario College of Business




Awarded as best thesis, [2009]

Defense Panel Member

Michael Edward S. Mercado
Florenz C. Tugas


This paper examines accounting conservatism in the Property and the Food, Beverage, and Tobacco (FBT) industries in the Philippines with a quarterly dataset from 1997 to 2008. Following Basu (1997 2001), accounting conservatism is defined as the accountants tendency to require a higher degree of verification for recognizing good news than bad news in the financial statements. Empirically, this could be derived as the incremental speed of bad news recognition over good news. The paper use quarterly stock returns as proxy for publicly available market news. Simple OLS estimations were applied for firm level analysis. For the industry level analysis, Fama-Macbeth estimation procedures were used. Structural change analysis was also applied to test for the effect of the Sarbanes-Oxley Act of 2002 to the conservative behavior of the sample firms. For the results, it was found out that firms in both industries exhibited increased conservatism during the fourth quarter. For the interim periods, generally, good news was relatively more timely recognized in earnings. This could be attributed to the setting up effect which is further discussed in the results and analysis part. The FBT industry also showed more conservative behavior than the Property industry. These could be attributed to the peculiarities between the industries which include rules on revenue recognition, litigation and regulations, visibility and public scrutiny, contractual obligations applications, and taxation. As for the structural change analysis, sample firms in both industries showed evidence that the milestone year 2002 brought about changes in the conservative behavior of these firms.

Abstract Format



Running head: Assessing accounting conservatism





Accession Number


Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Physical Description

123 leaves ; 28 cm.


Accounting; Accounting--Standards--Philippines; Property--Philippines; Food industry and trade--Philippines; Beverage industry--Philippines; Tobacco industry--Philippines

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