Contracting and Reporting Conservatism around a Change in Fiduciary Duties*
| Autor: | Sterling Huang, Wan Wongsunwai, Daniel A. Bens, Liang Tan |
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| Rok vydání: | 2020 |
| Předmět: | |
| Zdroj: | Contemporary Accounting Research |
| ISSN: | 1911-3846 0823-9150 |
| DOI: | 10.1111/1911-3846.12607 |
| Popis: | We exploit an influential 1991 Delaware court ruling to examine simultaneously two types of conservatism that play important roles in resolving creditor-owner agency conflicts: contracting conservatism and reporting conservatism The ruling expanded managerial fiduciary duties in favor of creditors for Delaware-incorporated firms in the vicinity of insolvency In those firms, following the ruling, debt contracts are less likely to include conservative adjustments to accounting numbers used for covenant compliance (i e , contracting conservatism decreases), while public financial reporting becomes more conservative (i e , reporting conservatism increases) The decrease in contracting conservatism is concentrated in firms that exhibit a greater increase in reporting conservatism, suggesting that reporting conservatism is more cost effective in resolving agency conflicts In addition, the substitution effect is more pronounced in firms facing greater business uncertainty and firms with greater board independence This article is protected by copyright All rights reserved |
| Databáze: | OpenAIRE |
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