Abstract

The current financial crisis which began in 2008 created economic disruption on a global level. This study
investigates the effect of accounting conservatism on the disposition effect in the Chinese capital markets. Our
research findings show accounting conservatism offsets “overestimation “and “underestimation” resulting from
the disposition effect. From an accounting perspective, we find the governance role of conservatism may correct
inaccurate market pricings; we believe this research provides knowledge that will assist investors and policy
makers to understand accounting conservatism and make better decisions.

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