Accounting conservatism and managerial risk-taking: Corporate acquisitions

• 成果类型: Article
• 署名作者: Kravet, Todd D.
• 署名单位: University of Texas System; University of Texas Dallas; University of Connecticut
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2014.04.003
• 发表日期: 2014
• 关键词: asymmetric timeliness; performance-measures; ceo overconfidence; earnings; INVESTMENT; COMPENSATION; incentives; disclosure; QUALITY; firm

摘要

Watts (2003) and Ball and Shivakumar (2005) argue that accounting conservatism decreases managerial incentives to make negative net present value investments. I develop and test a new hypothesis that accounting conservatism is associated with managers making less risky investments. I find that under more conservative accounting managers make less risky acquisitions and that firms with accounting-based debt covenants drive this association. This result is consistent with conservative firms avoiding risky investments because of the potential for large losses to trigger debt covenants. Conservatism reducing risk-shifting can in part explain debt holders' demand for conservative accounting. (C) 2014 Elsevier B.V. All rights reserved.