Does accounting conservatism improve the corporate information environment?

Hu, Jinshuai; Li, Annie Yuansha; Zhang, Frank

doi:10.1016/j.intaccaudtax.2014.02.003

Cited by 47 publications

(29 citation statements)

References 53 publications

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“…Prior studies indicate that accounting conservatism effectively modulates moral hazard problems among managers, debtholders, and shareholders (Ahmed et al 2002;Lafond and Roychowdhury 2008), helps reduce information asymmetry (Hu et al 2013;LaFond and Watts 2008), and protects shareholder interests by serving as a governance mechanism to limit managerial opportunism (Bushman et al 2011;Francis and Martin 2010).…”

Section: Introductionmentioning

confidence: 99%

CEO Gender, Ethical Leadership, and Accounting Conservatism

et al. 2014

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Because male CEOs dominate corporate leadership, the literature on top management decision-making suffers from an implicit masculine bias. Although research indicates that males and females are biologically and psychologically different, the leadership characteristics of female CEOs are largely unexplored. Two of these characteristics, risk aversion and ethical sensitivity, are tied to key accounting issues, such as conservatism in financial reporting and steadfast opposition to fraud. In this study, we examine the relationship between CEO gender and accounting conservatism, and find a positive association between the two. Consistent with conventional wisdom, this association appears to be stronger in firms with high rather than low litigation and takeover risks. This study contributes to the ethics literature by highlighting the benefits of gender diversity in upholding the integrity of financial reporting.

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Section: Introductionmentioning

confidence: 99%

CEO Gender, Ethical Leadership, and Accounting Conservatism

et al. 2014

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“…an accounting choice that can improve the quality of accounting information or impair accounting information. According to Hu, Li and Zhang (2014), accounting information presents higher quality when it is more conservative and according to Jones (1991) it has lower quality when it is opportunistic from the perspective of earnings management.…”

Section: Relationship Between Conservative and Opportunity Accountingmentioning

confidence: 99%

“…In relation to accounting conservatism, according to Basu (1997), this refers to the accounting choice of asymmetric recognition of economic gains and losses, and managers have incentives to voluntarily disclose bad news and suppress good news about the company, in order not to report more optimistic accounting information than it actually is. Still, for Hu et al (2014), conservative choices can be observed when losses are recognized in the income statement as probable and also when the recognition of gains is postponed until they are verifiable. According to FASB (1980), accounting conservatism is a prudent choice that attempts to ensure that uncertainties and business risks of companies are reported in by the less optimistic choice of a given accounting fact.…”

Section: Relationship Between Conservative and Opportunity Accountingmentioning

confidence: 99%

Internal Control Deficiencies and Conservative and Opportunist Accounting Choices

Cunha¹,

Silva²,

Rohenkohl³

2019

CGG

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Objective: To analyze the influence of internal control deficiencies on conservative and opportunistic accounting choices. Method: Objective description, documentary procedures and quantitative approach to the problem. The sample consisted of 63 to 77 companies with unbalanced data for each year from 2010 to 2015, which had an audit committee, as well as other information necessary for this analysis. The main analysis was carried out based on panel data regression using STATA software. Originality/relevance: It presents as relevant in the current study the measurement and analysis of internal control deficiencies, since little has been discussed in national surveys, mainly due to the difficulty of measurement. Results: The results showed that the company's internal environment, when presented deficiencies, did not impact on differentiated conservative accounting choices, but significantly influenced in the increase of the level of management to reduce the result. In addition, it was found that the control variables size of the company and profitability of the asset influenced in the reduction of the level of management in order to increase the result, which evidences the company's choice to reduce political costs. Theoretical and methodological contributions: As a contribution of the study, it is clear that in a weak internal control environment, even if the company has an audit committee, there may be an increase in the level of management earnings, which impairs the quality of accounting information.

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“…Ref. [2] argues that accounting information has an important role in the capital market. Previous studies have linked information asymmetry with the cost of equity capital.…”

Section: Introductionmentioning

confidence: 99%

Information Asymmetry, Ownership Structure and Cost of Equity Capital: The Formation for Open Innovation

Muslim¹,

Setiawan

2021

Journal of Open Innovation: Technology, Market, and Complexity

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Our study aims to investigate how information asymmetry and ownership structure affect cost of equity capital. For that purpose, we collected 246 issuers over 4 years for a total of 984 observations. By using panel data processing, we found that the information asymmetry we proxied through Price non-Synchronization and trading volume had an effect on the cost of equity capital. Our results also confirmed both Agency Theory and Pecking Order Theory. Both theories are in line with the conditions of the stock market in Indonesia. In addition, we found that institutional and foreign ownership structures also had an effect on the cost of equity capital. Furthermore, our results also confirmed Interest Alignment Theory and Entrenchment Theory. Our research is expected to contribute to the debate on the existence of information asymmetry and ownership structures in relation to the cost of equity capital. We also hope that it will be a valuable input for investors in considering their investment. Moreover, from the results of this study, investors can also consider foreign ownership or institutional ownership in determining their investment. In addition, stock market regulators in Indonesia can develop approaches to minimize information asymmetry and encourage foreign investors to invest in Indonesia.

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Does accounting conservatism improve the corporate information environment?

Cited by 47 publications

References 53 publications

CEO Gender, Ethical Leadership, and Accounting Conservatism

CEO Gender, Ethical Leadership, and Accounting Conservatism

Internal Control Deficiencies and Conservative and Opportunist Accounting Choices

Information Asymmetry, Ownership Structure and Cost of Equity Capital: The Formation for Open Innovation

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