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This paper finds evidence that delisting firms make reported earnings more conservative to avoid litigation risk. Conservatism has been used as one of suitable reporting quality measurements that is separate from discretionary accruals, in that investors can monitor the firm’s contract efficiency or litigation risk by demanding conservatism. We collect a sample that is composed of 6348 listed non-financial companies for the period 2009–2016. Our results are as follows. First, we find that companies ahead of delisting are more conservative than other companies in Korean Securities Dealers Automated Quotations (KOSDAQ). Second, companies that are ahead of delisting whose auditor is non-big4 are significantly more conservative. Our results imply that companies that are in the process of delisting are seeking to increase their sustainability and to improve earnings quality, such as conservatism, and that small auditors are more conservative in order to mitigate the higher risk of litigation in comparison with big4 auditors. This study has a role to complement prior studies regarding delisting, and provides that the delisting institutions in KOSDAQ market can improve the efficiency and the reliability of the capital market.