Uncertainty of uncertainty and accounting conservatism

We investigate the impact of uncertainty of uncertainty (UOU) on corporate accounting conservatism, finding a positive association. Mechanism analysis suggests that under UOU, creditor demands for real information drives shifts toward accounting conservatism. Further analysis shows that the impact of UOU is more salient in non-SOEs, and firms with weak external monitoring mechanisms. Our study highlights that under uncertainty about levels of uncertainty, contract demand plays a significant role in corporate governance.

Automated summary

We examine the impact of uncertainty of uncertainty (UOU) on corporate accounting conservatism and find a positive association. Mechanism analysis reveals that under UOU, creditors' demand for real information drives an increase in accounting conservatism. Further analysis shows that the effect of UOU is more pronounced in non-SOEs and firms with weak external monitoring mechanisms. Our study highlights the significant role of contract demand in corporate governance under uncertainty about levels of uncertainty.