Dr. XIE Yuying, SabrinaSabrinaDr. XIE YuyingZheng, LiuLiuZhengLau, H. L. AmyH. L. AmyLau2017-07-142017-07-142012Pacific Accounting Review, 2012, vol. 24(2), pp. 138-160.0114-0582http://hdl.handle.net/20.500.11861/4217Highly Commended Paper Award Winner at the Emerald Literati Network Awards for Excellence 2013The purpose of this study is to investigate reporting incentives for accounting conservatism in the context of asset and equity tunnelling and to provide empirical evidence that accounting conservatism can be reported for opportunistic reasons rather than efficiency reasons. <br> Design/methodology/approach A cross‐sectional analysis of data from the period 2002 to 2004 is conducted.<br> Findings This study provides empirical evidence that firms undertaking asset or equity tunnelling transactions report higher conservatism than firms undertaking other kinds of connected transactions. Further tests document a positive association between accounting conservatism and the private benefits gained by controlling shareholders from asset and equity tunnelling.<br> Originality/value Contrary to the prevalent view that accounting conservatism signifies better quality accounting and benefits financial statement users, this study shows that accounting conservatism is influenced by institutional factors and the incentives of financial statement preparers. Researchers should exercise caution in interpreting higher accounting conservatism as an indication of better accounting information quality, especially in cross‐country research involving different institutions.<br>enConservatismTunnellingConnected TransactionsControlling ShareholdersAccountingHong KongPeer Reviewed Journal Article10.1108/01140581211258452