Accounting conservatism and corporate governance

• 成果类型: Article
• 署名作者: Garcia Lara, Juan Manuel; Garcia Osma, Beatriz; Penalva, Fernando
• 署名单位: University of Navarra; IESE Business School; Universidad Carlos III de Madrid; Autonomous University of Madrid
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-007-9060-1
• 发表日期: 2009
• 页码: 161-201
• 关键词: free cash flow; earnings management; INTERNATIONAL DIFFERENCES; director characteristics; asymmetric timeliness; AGENCY COSTS; BOARD; firm; performance; equity

摘要

We predict that firms with stronger corporate governance will exhibit a higher degree of accounting conservatism. Governance level is assessed using a composite measure that incorporates several internal and external characteristics. Consistent with our prediction, strong governance firms show significantly higher levels of conditional accounting conservatism. Our tests take into account the endogenous nature of corporate governance, and the results are robust to the use of several measures of conservatism (market-based and nonmarket-based). Our evidence is consistent with the direction of causality flowing from governance to conservatism, and not vice versa, indicating that governance and conservatism are not substitutes. Finally, we study the impact of earnings discretion on the sensitivity of earnings to bad news across governance structures. We find that, on average, strong-governance firms appear to use discretionary accruals to inform investors about bad news in a timelier manner.