Accounting Conservatism And Firms’ Investment Decisions
| Autor: | Won-Wook Choi, Jungeun Cho |
|---|---|
| Rok vydání: | 2016 |
| Předmět: |
050208 finance
business.industry media_common.quotation_subject Corporate governance 05 social sciences Control (management) Accounting 050201 accounting Investment (macroeconomics) Accounting conservatism Investment decisions 0502 economics and business Accounting information system Agency (sociology) Economics Business and International Management business Welfare media_common |
| Zdroj: | Journal of Applied Business Research (JABR). 32:1223-1236 |
| ISSN: | 2157-8834 0892-7626 |
| DOI: | 10.19030/jabr.v32i4.9732 |
| Popis: | This study examines the effectiveness of accounting conservatism in monitoring and controlling managers’ decision-making regarding opportunistic investment. We find that accounting conservatism is negatively associated with over-investment. This suggests that conservative accounting policies serve as an efficient monitoring and controlling mechanism for opportunistic investment decisions. We also find a stronger negative association between accounting conservatism and over-investment in firms with low managerial ownership and low ownership by foreign investors. The results of our analysis imply that the impact of timely loss recognition on over-investment is more significant in firms with high agency problems and weaker monitoring ability, and that this factor complements other governance mechanisms, thereby helping to control managers’ myopic investment decisions. We provide evidence for a role of financial disclosure in mitigating managers’ opportunistic over-investment decisions. Though managers’ over-investment decisions are motivated by private gain, which reduces firm performance and compromises investors’ welfare, limited research exists on the role of financial information in alleviating such behavior. We suggest that timely loss recognition in financial statements can serve as an effective monitoring mechanism to aid in control of managers’ myopic over-investment. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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