Meet/Beat Market Expectation, Accounting Conservatism and Corporate Governance PDF Download
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Author: Bikki Jaggi
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
Accounting conservatism has been recognized as a reporting strategy that benefits shareholders and financial statement users. We hypothesize that managers in general are likely to sacrifice the benefit associated with accounting conservatism when adopting meeting/beating market expectations (hereafter MBME). Our findings show a negative association between MBME, proxied by analysts' consensus forecasts, and accounting conservatism, defined in terms of conditional conservatism (Basu, 1997; Ball and Shivakumar, 2005, 2006) and we show that such relationship is not a mechanical connection between reporting strategy and managerial incentives to report higher earnings. Further analysis show that the negative relationship still exists after controlling for expectation as well as accrual-based and real earnings management. However, we document that G-index (Gompers et al., 2003), reflecting corporate governance in terms of anti-takeover provisions, has a significant impact on the negative association between accounting conservatism and MBME. Such finding shows that firms with less anti-takeover provisions, proxied by G-index, are less likely to sacrifice the benefit associated with conservative accounting for MBME.
Author: Bikki Jaggi
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
Accounting conservatism has been recognized as a reporting strategy that benefits shareholders and financial statement users. We hypothesize that managers in general are likely to sacrifice the benefit associated with accounting conservatism when adopting meeting/beating market expectations (hereafter MBME). Our findings show a negative association between MBME, proxied by analysts' consensus forecasts, and accounting conservatism, defined in terms of conditional conservatism (Basu, 1997; Ball and Shivakumar, 2005, 2006) and we show that such relationship is not a mechanical connection between reporting strategy and managerial incentives to report higher earnings. Further analysis show that the negative relationship still exists after controlling for expectation as well as accrual-based and real earnings management. However, we document that G-index (Gompers et al., 2003), reflecting corporate governance in terms of anti-takeover provisions, has a significant impact on the negative association between accounting conservatism and MBME. Such finding shows that firms with less anti-takeover provisions, proxied by G-index, are less likely to sacrifice the benefit associated with conservative accounting for MBME.
Author: Bikki Jaggi
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
It is argued in the literature that accounting conservatism may be used as a substitute for management earnings forecasts (MEFs) to reduce information asymmetry between investors and management (Hui et al., 2009). We document in this study that accounting conservatism serves as a substitute for informative MEFs and especially for pessimistic MEFs, but not for opportunistic and optimistic forecasts. Accounting conservatism may, however, be used as supplementary to optimistic MEFs. Additionally, we find that accounting conservatism is especially used by the firms that have strong corporate governance, suggesting that strong corporate governance encourages the use of accounting conservatism rather than issuance of MEFs to reduce information asymmetry and to minimize potential legal suits for the firm.
Author: Christian Leuz
Publisher: Oxford University Press, USA
ISBN: 9780199286782
Category : Business & Economics
Languages : en
Pages : 448
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Book Description
For the most part we have accepted the impartiality and objectivity of accounting and not recognized how accounting systems are embedded in a country's economic and legal framework. In this book, international scholars address a number of important questions about the role of accounting in society.
Author: Marselinus Asri
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
The research aim is to examine other variables that also affect the relationship between conservatism and earnings quality in emerging market. Normal Corporate Governance is a set of mechanisms that can protect minority shareholders from expropriation by managers and insider shareholders with an emphasis on legal mechanisms.Data Population are companies listed in Indonesia Stock Exchange during the period 2010-20015. The sample selection is based on purposive sampling method with the purpose of obtaining a representative sample. An Alternative measure of accounting conservatism used is the instrumental variables of Accounting conservatism (VIKV) developed by Lo Eko (Lo, 2005). The quality of earnings can be measured through discretionary accruals calculated by way of setting aside total accruals (TACC) and nondiscretionary accruals (NDACC). In calculating DACC, Modified Jones Model is used because it is considered better among other models to measure earnings management (Dechow et al., 1995).The results of this study indicate that the Instrumental Variables Conservatism (VIK) has a significant positive effect on the Earning Quality. This means that management positively signals the application of accounting conservatism within the company and has an impact on improving the quality of earnings. The next investor is expected to provide more valuations by providing a high premium for the company's stock price.
Author: Ian Drummond Gow
Publisher:
ISBN:
Category :
Languages : en
Pages : 280
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Book Description
Author: George W. Ruch
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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Book Description
We review and analyze the accounting literature that examines the effects of accounting conservatism on financial statements and financial statement users. We begin by analyzing how conservatism affects the reported numbers on the financial statements. These studies primarily evaluate how conservatism affects earnings quality, including earnings persistence and the presence of earnings management. Next, we assess the effect of accounting conservatism on the users of the financial statements. We identify three primary users of the financial statements: (1) equity market users (2) debt market users and (3) corporate governance users. Within each of these categories we analyze the findings of prior research and explore unanswered research questions. By analyzing the effects of accounting conservatism from a diverse range of research topics, we inform the discussion on the costs and benefits of accounting conservatism.
Author: Nor Farizal Mohammed
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 508
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Book Description
Author: Lavinia Olimid
Publisher:
ISBN:
Category :
Languages : en
Pages : 7
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Book Description
It has been suggested that accounting conservatism plays an important role in corporate governance. Our assumption is that conservative accounting is done by accountants that have a thorough understanding of basic conservative accounting. In our paper, we tested the attitude towards conservatism of individual accountants regarding issues linked to profit measurement and profit distribution. The results have implications for the process of disseminating the benefits of adopting a corporate governance code by Romanian companies.
Author: Farzaneh Nassir Zadeh
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Purpose -- The study on the relationship between accounting conservatism and earnings quality is not new. However, the results are inconsistent and mixed, and to some degree, even contradictory, which represents a gap in the literature. The purpose of this study is to provide some explanations for these mixed results in the literature by investigating the effect of corporate governance mechanisms, as a moderator variable (which has not been considered in the literature before), on the relationship between accounting conservatism and earnings quality based on the Dechow and Dichev model and the modified Jones model. Design/methodology/approach --The statistical model used in this study is a multivariate regression model; furthermore, the statistical technique used to test the hypotheses is panel data. Findings --The findings reveal that the adopted models Dechow and Dichev) and the corporate governance mechanisms (such as board independence, large shareholders, and institutional ownership) can have a moderating effect on the relationship between accounting conservatism and earnings quality. These findings are exciting, contribute to the current literature, and explain some of the reasons for mixed results. Practical implications -- The findings of the current study provide an important guideline for firms to consider the impact of adopted models (Dechow and Dichev), as well as the corporate governance mechanisms (such as board independence, large shareholders, and institutional ownership) on the relationship between accounting conservatism and earnings quality. Originality/value -- Examining the impact of Dechow and Dichev models as well as the corporate governance mechanisms on the relationship between accounting conservatism and earnings quality is new in this paper. It can explain part of the reasons for the mixed and inconsistent results in the literature.
Author: Jeffrey L. Callen
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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Book Description
This study explores the impact of state anti-takeover laws on the governance role of conditional accounting conservatism. Passage of these laws introduced an exogenous shock to the takeover threats faced by firms and constitutes a natural experiment for investigating the relation between financial reporting conservatism and governance. Employing a difference-in-differences methodology and accounting conservatism measures that are congruent with this methodology, we find that conditional accounting conservatism increased significantly after the passage of state anti-takeover laws consistent with accounting conservatism acting as a substitute internal governance mechanism for the weakened external governance environment. We further conjecture and document that the resulting increase in conservatism is greater for firms operating in less competitive industries, firms with better performance, and firms with lower institutional ownership. This study provides a more comprehensive understanding of the overall effect of state anti-takeover laws and contributes to the long standing debate about the impact of anti-takeover legislation on corporate control and governance.
