Abstract

The study's objective is to evaluate the role of the public sector in regulating accounting standards in Bahrain
Stock Exchange (BSE) through examining its ability to oblige those companies listed on the (BSE) to present a
reasonable level of accounting conservatism when preparing financial reports. In addition, the study examines
the factors that affect the level of accounting conservatism in those companies with regard to company size, debt
contracts, and the type of sector the company belongs to. To achieve these goals, two different methods were
used to measure conservatism level and the factors influencing it. The methods are: Basu (1997) model and
Book-to-Market approach. The sample of the study comprises of (50) companies listed on the (BSE) during the
period 2005-2008. Findings of the study showed that the public sector of regulating accounting standards
succeeded in forcing Bahrain companies to present a reasonable level of accounting conservatism. The study also
found out that the financial reports of big companies were conservative, while those of the small ones were not.
In addition, the debt contracts left an impact upon financial reports of accounting conservatism. Thus, companies
with higher debts were more conservative than those of lower ones. Moreover, the financial reports of the service
sector in Bahrain Stock Exchange were the most conservative. The findings of the study showed how significant
the accounting information in Bahrain was.

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