Accounting conservatism and firm investment efficiency

• 成果类型: Article
• 署名作者: Garcia Lara, Juan Manuel; Garcia Osma, Beatriz; Penalva, Fernando
• 署名单位: Universidad Carlos III de Madrid; Autonomous University of Madrid; University of Navarra; IESE Business School
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2015.07.003
• 发表日期: 2016
• 关键词: depreciation method choice; timely loss recognition; capital structure; information asymmetry; reporting quality; Cash flows; earnings; determinants; Timeliness; decisions

摘要

We argue that conservatism improves investment efficiency. In particular, we predict that it resolves debt-equity conflicts, facilitating a firm's access to debt financing and limiting under investment. This permits the financing of prudent investments that otherwise might not be pursued. Our empirical results confirm these predictions. We find that more conservative firms invest more and issue more debt in settings prone to underinvestment and that these effects are more pronounced in firms characterized by greater information asymmetries. We also find that conservatism is associated with reduced overinvestment, even for opaque investments such as research and development. (C) 2015 Elsevier B.V. All rights reserved.