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The influence of conditional conservatism on ownership dispersion: An international analysis

Journal

Spanish Journal of Finance and Accounting

Subject

Accounting

Publishing details

Spanish Journal of Finance and Accounting 2013 Vol 42:159 p 289-309

Authors / Editors

Ginera B;Tahoun A;Walker M

Biographies

Ahmed Tahoun

Publication Year

2013

Abstract

We study the influence of conditional accounting conservatism on domestic investor diversification decisions. We argue that a conservative accounting system that promotes the dissemination of bad news and which constrains managers from engaging in opportunistic activities reduces the need for investors to concentrate their ownership, and consequently helps investors to diversify their investments. Through a country-level analysis we show that increased domestic conditional conservatism and higher domestic diversification opportunities lead to higher levels of domestic ownership diversification. Our results are robust to alternative estimates of conditional conservatism, and indicate that conditionally conservative accounting systems improve risk sharing. These results suggest that the accounting system, and in particular accounting conservatism, is part of the institutional settings embedded in the infrastructures of capital markets.

Available on ECCH

No


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