Relationship Between Accounting Conservatism and Solvency and Liquidity Levels: Evidence from the Russian Banking Sector

Abstract

Цель работы: исследовать взаимосвязь принципа осторожности и уровней платежеспособности и ликвидности на примере российского банковского сектора. Задачи: изучить теорию по принципу осторожности и регулированию платежеспособности и ликвидности в банковском секторе, сформировать эмпирическую модель исследования, собрать выборку для эмпирического анализа, провести эмпирический анализ по выборке, изучить полученные результаты и сформулировать финальные рекомендации. Результаты: выявлена отрицательная зависимость между применением принципа осторожности и нормой достаточности капитала, нормативом краткосрочной ликвидности и нормативом долгосрочной ликвидности.

The goal of the research is to determine the relationship between accounting conservatism and solvency and liquidity levels, using evidence from Russian banks. We state and complete the following objectives: to analyze the theoretical background on accounting conservatism (its nature and measurement); to study existing literature on the relationship between accounting conservatism and solvency and liquidity of banks; to study regulatory international and Russian requirements for banks’ capital adequacy and liquidity levels; to identify the measures of accounting conservatism, solvency and liquidity levels; to build and describe a sample for the analysis; to conduct an empirical study on the built sample and provide managerial implications based on the findings. Main research findings: negative relationship was found between accounting conservatism and capital adequacy ratio. We conclude that managers tend to use more conservative estimates for potential gains and losses when the capital adequacy ratio that represents solvency level of the bank decreases. Moreover, there is negative relationship between accounting conservatism and two liquidity ratios: instant liquidity ratio and long-run liquidity ratio. Based on the findings, we provide several recommendations for the key stakeholders in the banking sector.