Corporate Governance, Accounting Conservatism, and Manipulation

• 成果类型: Article
• 署名作者: Caskey, Judson; Laux, Volker
• 署名单位: University of California System; University of California Los Angeles; University of Texas System; University of Texas Austin
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2015.2341
• 发表日期: 2017
• 页码: 424-437
• 关键词: CORPORATE GOVERNANCE; conservatism; manipulation; Investment decisions

摘要

We develop a model to analyze how board governance affects firms' financial reporting choices and managers' incentives to manipulate accounting reports. In our setting, ceteris paribus, conservative accounting is desirable because it allows the board of directors to better oversee the firm's investment decisions. This feature of conservatism, however, causes the manager to manipulate the accounting system to mislead the board and distort its decisions. Effective reporting oversight curtails managers' ability to manipulate, which increases the benefits of conservative accounting and simultaneously reduces its costs. Our model predicts that stronger reporting oversight leads to greater accounting conservatism, manipulation, and investment efficiency.