Debtholders' Demand for Conservatism: Evidence from Changes in Directors' Fiduciary Duties

• 成果类型: Article
• 署名作者: Aier, Jagadison K.; Chen, Long; Pevzner, Mikhail
• 署名单位: George Mason University; University System of Maryland; University of Baltimore
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12062
• 发表日期: 2014
• 页码: 993-1027
• 关键词: ACCOUNTING CONSERVATISM; unconditional conservatism; asymmetric timeliness; corporate governance; Financial distress; loss recognition; earnings; debt; expertise; FIRMS

摘要

Debtholders' demand has been widely discussed as a key determinant of conservatism but clear causal evidence is not yet established. Using a natural experiment setting, wherein a Delaware court ruled that the fiduciary duties of directors in near insolvent Delaware companies extend to creditors, we predict and find that firms subject to the ruling significantly increased their accounting conservatism. In addition, our results suggest that the increase in conservatism is more pronounced in near insolvent Delaware firms with stronger boards, confirming that the court ruling takes effect through the channel of the board of directors. Our results are robust to using alternative measures of conservatism and near insolvency status, and controlling for potential confounding factors and other stakeholders' demand for conservatism. Overall, our study provides empirical evidence to support the causal relation between debtholders' demand and accounting conservatism previously suggested in the literature, and offers some insights into the role of the board of directors in financial reporting.