Nonfinancial Stakeholder Orientation and Conditional Accounting Conservatism

Qing Liao Burke, Mengying Wang () and Yijia Eddie Zhao ()
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Qing Liao Burke: Miami University, 800 E High Street, Oxford, OH 45056, USA
Mengying Wang: University of Massachusetts Boston, 100 William T. Morrissey Blvd. Boston, MA 02125, USA
Yijia Eddie Zhao: University of Massachusetts Boston, 100 William T. Morrissey Blvd. Boston, MA 02125, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2020, vol. 23, issue 04, 1-46

Abstract: This study examines the relation between conditional accounting conservatism and nonfinancial stakeholder orientation. Using the staggered passage of constituency statutes to identify increases in nonfinancial stakeholder orientation, we document that firms report more conservatively after statute adoption. Cross-sectional analyses indicate the increase in conditional conservatism after statute enactment is more pronounced for firms with higher agency costs between shareholders and managers, and less pronounced for firms with customers that have greater bargaining strength. Collectively, our study sheds light on how the increasing trend of nonfinancial stakeholder orientation plays a role in shaping financial reporting practices.

Keywords: Conditional conservatism; nonfinancial stakeholder orientation; quasi-natural experiment; constituency statutes (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S0219091520500319

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