Board monitoring efficiency and the value of conservative accounting

Yanmin Gao () and Alfred Wagenhofer ()
Additional contact information
Yanmin Gao: Thompson Rivers University
Alfred Wagenhofer: University of Graz

Journal of Management & Governance, 2021, vol. 25, issue 2, No 2, 345 pages

Abstract: Abstract This paper provides a theoretical explanation for the observation that firms with strong corporate governance exhibit more conservative accounting. We study one of a board’s most important decisions: to retain or replace the incumbent manager. The board uses accounting information and additional information from costly board monitoring. We show that if the accounting information is useful only for the replacement decision, then conservatism is harmful because it leads to too much replacement. If accounting information is relevant for the board’s decision whether to monitor, then conservatism is beneficial when the board is a sufficiently efficient monitor. We also provide several predictions for empirical tests.

Keywords: Conservative accounting; Corporate governance; Board of directors; Board monitoring; Management replacement (search for similar items in EconPapers)
JEL-codes: D82 G34 M41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10997-020-09524-y Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jmgtgv:v:25:y:2021:i:2:d:10.1007_s10997-020-09524-y

Ordering information: This journal article can be ordered from
http://www.springer. ... 29/journal/10997/PS2

DOI: 10.1007/s10997-020-09524-y

Access Statistics for this article

Journal of Management & Governance is currently edited by Lino Cinquini

More articles in Journal of Management & Governance from Springer, Accademia Italiana di Economia Aziendale (AIDEA) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().