Accounting conservatism and corporate governance

Lara, Juan Manuel Garcı́a; Osma, Beatriz Garcı́a; Peñalva, Fernando

doi:10.1007/s11142-007-9060-1

Cited by 408 publications

(216 citation statements)

References 83 publications

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“…If the corporate governance is better, the need for accounting conservatism is lower. However, the findings obtained by Lara, Osma and Penalva (2009) show when the corporate governance mechanism is better, accounting conservatism increases, and there exists a causal relationship. Ramalingegowda and Yu (2012) anticipate and find that if the institutional investors with the motivation to exercise supervision hold more shares, the firms will be more inclined to adopt the conservative accounting principle.…”

Section: Accounting Conservatismmentioning

confidence: 94%

“…For example, Lee and Yeh (2004) argue that the worse the corporate governance mechanism is, the higher will be the probability of financial distress. Besides, Lara, Osma and Penalva (2009) predict that the degree of accounting conservatism is higher when the corporate governance is better. From the above study, it can be found the corporate governance can affect accounting conservatism and financial distress simultaneously, and corporate governance can be viewed as a generalized firm characteristic.…”

Section: Accounting Conservatism and Financial Distressmentioning

confidence: 99%

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Accounting Conservatism Trends and Financial Distress: Considering the Endogeneity of the C-Score

Kao¹,

Sie²

2016

International Journal of Financial Research

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To consider a firm's characteristics endogeneity and thereby determine its trend toward accounting conservatism, which in turn affects its financial distress, this study adopts the two-stage least squares approach. The first stage involves investigating the effect of the corporate characteristics on accounting conservatism. The empirical results indicate that financial distress and accounting conservatism exhibit a positive correlation. With respect to the non-financially distressed company, the accounting conservatism of the financially-distressed company is higher. The second phase in the logistic regression is to explore the relationship between the accounting conservatism trends and financial distress. The empirical results indicate that the trends and volatility of the accounting conservatism are significant and positively related to the financial distress, which may be due to the recognition of the company's annual loss on one occasion or the accountants' role in the function of exercising external oversight, thus increasing the company's accounting conservatism. According to the empirical results of this study we have found that the accounting conservatism trends of different company characteristics helps to determine the signs of financial distress. It is recommended that within the management of the company's operations the users of financial statements be aware of the trend and volatility of the accounting conservatism. This is of particular importance due to the probable development of the relevant decision-making processes of the company's stakeholders.

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Section: Accounting Conservatismmentioning

confidence: 94%

Section: Accounting Conservatism and Financial Distressmentioning

confidence: 99%

Accounting Conservatism Trends and Financial Distress: Considering the Endogeneity of the C-Score

Kao¹,

Sie²

2016

International Journal of Financial Research

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“…Garcia Lara et al (2009) confirm that stronger corporate governance will present a higher degree of accounting conservatism. However, Chi and Hsu (2009) confirm that firms with weaker governance structures tend to be more conservative.…”

Section: Corporate Governance Variablesmentioning

confidence: 82%

Research and development accounting treatment: effects of CEO characteristics and corporate governance mechanisms

Damak¹

2017

IJAES

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This study aims to examine empirically the influence of Chief Executive Officer (CEO) characteristics and corporate governance mechanisms on Research and Development (R&D) capitalization in France. Using data drawn from a sample of non-financial firms listed in SBF 120, this study provides empirical evidence for the influence of CEO characteristics and audit quality on R&D capitalization. As results, we find that R&D capitalization is likely to be increased in firms managed by younger managers, CEOs with higher ownership, shorter tenure and higher educational level. Also, R&D capitalization is likely to be increased in firms with lower audit quality, in higher leveraged firms, in less performed and larger firms. This study offers insights to investors and accounting standard setters interested about the subject of R&D capitalization determinants. Importantly, it confirms that some CEO characteristics and corporate governance mechanisms are likely to affect the CEO's behavior regarding the R&D accounting treatment.

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“…Chen et al 2011 [20] analyzed the effects of overinvestment and underinvestment on the quality of earnings for private firms in emerging markets. Similarly, Garcia-Lara et al (2010) [41] reported that conservatism in accounting can reduce both overinvestment and underinvestment. This implies that the conservativeness of the accounting process reduces the investment cash flow of overinvested firms and facilitates the access of external funds for underinvestment firms.…”

Section: Earnings Management and Investment Efficiencymentioning

confidence: 95%

The Effect of Analyst Coverage on the Relationship between Seasoned Equity Offerings and Investment Efficiency From Korea

Kim

2018

Sustainability

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Abstract:In order for a firm to remain sustainable, it must establish a strategy that is appropriate to its changing environment. One of these strategies is that the procurement of capital and the efficient operation of the procured capital are directly linked to the sustainability of the firm. This study empirically analyzes the relationship between seasoned equity offerings (hereafter SEO) and investment efficiency. We examine the investment efficiency of firms that have SEO and those that do not, and then analyze the effect of analysts on the relationship between SEO and investment efficiency. The empirical results of this study are as follows. First, there is a significant negative correlation between SEO and investment efficiency, meaning that firms with SEO have lower investment efficiency than firms without SEO. Second, the interaction variable between SEO and analyst participation showed a significant positive correlation with investment efficiency, meaning that the more active the analyst, the more any ineffective investment that is derived from managers' opportunistic earnings management is suppressed. The results show that the efficient operation of procured capital is important for the sustainability of the firm, and that the analyst plays an important role in monitoring the efficient allocation of resources as an external auditor.

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Accounting conservatism and corporate governance

Cited by 408 publications

References 83 publications

Accounting Conservatism Trends and Financial Distress: Considering the Endogeneity of the C-Score

Accounting Conservatism Trends and Financial Distress: Considering the Endogeneity of the C-Score

Research and development accounting treatment: effects of CEO characteristics and corporate governance mechanisms

The Effect of Analyst Coverage on the Relationship between Seasoned Equity Offerings and Investment Efficiency From Korea

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