Institutional Ownership And Conservatism
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| Author | : Ryan Peterson |
| Publisher | : |
| Total Pages | : 9 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Prior studies have examined whether conservatism acts as a compliment or a supplement to corporate governance. One argument is that firms with better corporate governance exhibit greater accounting conservatism because of the corporate governance. The other possibility is that conservatism is demanded in the absence of other forms of corporate governance. This study adds to that line of literature by examining the effect of institutional ownership on accounting conservatism. Specifically, we test whether firms with less institutional ownership exhibit more or less accounting conservatism. Consistent with the argument that greater corporate governance leads to more accounting conservatism, our results indicate a higher degree of conservatism in high-institutional ownership settings, consistent with a complimentary relationship between the monitoring from institutional ownership and conservatism. This finding contributes to the debate over why accounting conservatism occurs by finding an increased level of conservatism in firms with better corporate governance.
| Author | : Ling Lin |
| Publisher | : |
| Total Pages | : |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
This study empirically investigates the association between institutional ownership composition and accounting conservatism. Transient (dedicated) institutional investors, holding diversified (concentrated) portfolios with high (low) portfolio turnover, focus on portfolio firms' short-term (long-term) perspectives and trade heavily (generally do not trade) on current earnings news. Thus, I predict that as transient (dedicated) institutional ownership increases, firms will exhibit a lower (higher) degree of accounting conservatism. Consistent with my predictions, in the context of asymmetric timeliness of earnings, I document that as the level of transient (dedicated) institutional ownership increases, earnings become less (more) asymmetrically timely in recognizing bad news.
| Author | : Vieira, Elisabete S. |
| Publisher | : IGI Global |
| Total Pages | : 433 |
| Release | : 2021-02-12 |
| Genre | : Business & Economics |
| ISBN | : 1799875989 |
New trends are emerging regarding earnings management and corporate governance showing similarities and striking differences in the practices of different countries and economies. These new trends currently shape the field of modern corporate governance with crucial issues being looked at in governance law and practices, accounting systems, earnings quality and management, stakeholder involvement, and more. In order to advance these new avenues in corporate governance, research looks at accounting policies firms use in different opportunistic circumstances in order to manage earnings, the corporate governance practices in different countries, firm performance, and other dimensions of companies. The understanding of these topics is beneficial in understanding the current state of different types of firms and their practices in modern times. Comparative Research on Earnings Management, Corporate Governance, and Economic Value is focused on the investigation of key challenges and perspectives of corporate governance and earnings management and outlines possible scenarios of its development. The chapters explore this new avenue of research and cover theoretical, empirical, and experimental studies related to different themes in the global context of earnings management and corporate governance. This book is ideal for economists, businesses, managers, accountants, practitioners, stakeholders, researchers, academicians, and students who are interested in the current issues and advancements in corporate governance and earnings management.
| Author | : Reena Aggarwal |
| Publisher | : World Bank Publications |
| Total Pages | : 47 |
| Release | : 2003 |
| Genre | : Foreign exchange |
| ISBN | : |
| Author | : Anwer S. Ahmed |
| Publisher | : |
| Total Pages | : 52 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
Using three different measures of conservatism, we document that (i) the percentage of inside directors is negatively related to conservatism, and (ii) the percentage of outside directors' shareholdings is positively related to conservatism. Our results hold after controlling for industry, firm size, leverage, growth opportunities, institutional ownership, inside director ownership, and unobservable firm characteristics that are stable over time. Overall, the evidence is consistent with accounting conservatism assisting directors in reducing agency costs of firms.
| Author | : Michael E. Porter |
| Publisher | : |
| Total Pages | : |
| Release | : 1994-12-01 |
| Genre | : |
| ISBN | : 9780071034272 |
| Author | : Farzaneh Nassir Zadeh |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2022 |
| Genre | : |
| ISBN | : |
Purpose -- The study on the relationship between accounting conservatism and earnings quality is not new. However, the results are inconsistent and mixed, and to some degree, even contradictory, which represents a gap in the literature. The purpose of this study is to provide some explanations for these mixed results in the literature by investigating the effect of corporate governance mechanisms, as a moderator variable (which has not been considered in the literature before), on the relationship between accounting conservatism and earnings quality based on the Dechow and Dichev model and the modified Jones model. Design/methodology/approach --The statistical model used in this study is a multivariate regression model; furthermore, the statistical technique used to test the hypotheses is panel data. Findings --The findings reveal that the adopted models Dechow and Dichev) and the corporate governance mechanisms (such as board independence, large shareholders, and institutional ownership) can have a moderating effect on the relationship between accounting conservatism and earnings quality. These findings are exciting, contribute to the current literature, and explain some of the reasons for mixed results. Practical implications -- The findings of the current study provide an important guideline for firms to consider the impact of adopted models (Dechow and Dichev), as well as the corporate governance mechanisms (such as board independence, large shareholders, and institutional ownership) on the relationship between accounting conservatism and earnings quality. Originality/value -- Examining the impact of Dechow and Dichev models as well as the corporate governance mechanisms on the relationship between accounting conservatism and earnings quality is new in this paper. It can explain part of the reasons for the mixed and inconsistent results in the literature.
| Author | : Begoña Giner |
| Publisher | : |
| Total Pages | : 29 |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
We study the influence of conditional accounting conservatism on domestic investor diversification decisions. We argue that a conservative accounting system that promotes the dissemination of bad news and which constrains managers from engaging in opportunistic activities reduces the need for investors to concentrate their ownership, and consequently helps investors to diversify their investments. Through a country-level analysis we show that increased domestic conditional conservatism and higher domestic diversification opportunities lead to higher levels of domestic ownership diversification. Our results are robust to alternative estimates of conditional conservatism, and indicate that conditionally conservative accounting systems improve risk sharing. These results suggest that the accounting system, and in particular accounting conservatism, is part of the institutional settings embedded in the infrastructures of capital markets.
| Author | : Jeffrey L. Callen |
| Publisher | : |
| Total Pages | : 58 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
This study explores the impact of state anti-takeover laws on the governance role of conditional accounting conservatism. Passage of these laws introduced an exogenous shock to the takeover threats faced by firms and constitutes a natural experiment for investigating the relation between financial reporting conservatism and governance. Employing a difference-in-differences methodology and accounting conservatism measures that are congruent with this methodology, we find that conditional accounting conservatism increased significantly after the passage of state anti-takeover laws consistent with accounting conservatism acting as a substitute internal governance mechanism for the weakened external governance environment. We further conjecture and document that the resulting increase in conservatism is greater for firms operating in less competitive industries, firms with better performance, and firms with lower institutional ownership. This study provides a more comprehensive understanding of the overall effect of state anti-takeover laws and contributes to the long standing debate about the impact of anti-takeover legislation on corporate control and governance.
| Author | : Feng Chen |
| Publisher | : |
| Total Pages | : 63 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
While prior research holds the consensus that accounting conservatism can serve as an effective monitoring device, it is not clear whether shareholders can successfully enforce managers' adherence to accounting conservatism when directors fail to fulfill their fiduciary duties. We attempt to answer the question by exploiting staggered enactments of the universal demand (UD) laws in 23 U.S. states. UD laws raise procedural hurdles for shareholders to file derivative lawsuits against managers and directors who allegedly breach their fiduciary duties. For firms incorporated in states that adopt UD laws, restrictions on shareholder litigation rights shift power to managers, thereby weakening directors' incentives to monitor managers. We predict and find a decrease in conditional conservatism following the enactment of UD laws. The main result is attributable to both the direct channel (through restriction of shareholder litigation rights) and the indirect channel (through the deployment of management-friendly governance provisions). The decline in conditional conservatism exists only for firms with low institutional ownership, low external equity dependence, or high ex-ante derivative lawsuit risk. Our findings suggest that shareholders cannot successfully demand accounting conservatism when managers possess extensive power and directors lack the incentives to monitor managers.
