The Impact of Accounting Conservatism on Profit Stability: An Applied Study of Standard Chartered PLC, 2010-2020

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Published: 2023-03-30
DOI: https://doi.org/10.48161/qelj.v2n1a6
Keywords:
Accounting Conservatism, Profit Stability, Earnings Quality, Standard Chartered PLC, Banking Sector

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V. Sudhakar Rao
Faculty of Economics, Business and Accounting, ICATS University College, Kuching, Malaysia
Etelka Éva Katits
Department of Finance and Management, University of Pannonia, Zalaegerszeg, Hungary

Abstract

This study investigates the impact of accounting conservatism on profit stability using Standard Chartered PLC as an applied banking case for the period 2010–2020. The study is grounded in the view that conservative accounting improves earnings credibility by recognizing losses in a timely manner and applying greater caution in recognizing gains. Using annual reports and published financial statements, the paper reviews the theoretical foundations of accounting conservatism and develops an applied framework that examines profit stability in relation to conservatism, bank size, leverage, growth, and macroeconomic conditions. The discussion indicates that conservative reporting can support more reliable and transparent profit measurement, particularly in the banking sector, where earnings are strongly affected by credit risk, impairment recognition, regulatory requirements, and economic shocks. The case of Standard Chartered PLC shows that conservatism is especially important during periods of uncertainty, including the COVID-19 shock in 2020, when prudent provisioning and timely recognition of losses are critical to maintaining reporting credibility. The study concludes that accounting conservatism can contribute to profit stability when applied in a balanced manner that improves transparency without weakening the relevance of financial information. The findings provide useful implications for bank managers, investors, regulators, and researchers concerned with earnings quality, financial reporting discipline, and banking-sector stability.

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Vol. 2 No. 1 (2023)

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Articles
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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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