Abstract

http://ssrn.com/abstract=1426839
 
 

References (157)



 
 

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Corporate Suppliers and Customers and Accounting Conservatism


Kai Wai Hui


Hong Kong University of Science & Technology - Department of Accounting

Sandy Klasa


University of Arizona - Department of Finance

P. Eric Yeung


Cornell University - Samuel Curtis Johnson Graduate School of Management

November 1, 2011


Abstract:     
We argue that a firm’s suppliers and customers prefer it to account more conservatively due to information asymmetry and these stakeholders’ asymmetric payoffs with respect to the firm’s performance. We predict that a firm meets this demand for accounting conservatism when suppliers or customers have bargaining advantages over it that enable them to dictate terms of trade or whether trade occurs at all. We show that when a firm’s suppliers or customers have greater bargaining power, the firm recognizes losses more quickly. Our findings provide insights into how a firm’s powerful suppliers and customers are associated with its accounting practices and also support the contracting explanation for accounting conservatism.

Number of Pages in PDF File: 46

Keywords: Financial disclosures, Conservatism, Suppliers, Customers

JEL Classification: M41, K12, D82

working papers series


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Date posted: July 1, 2009 ; Last revised: November 13, 2011

Suggested Citation

Hui, Kai Wai and Klasa, Sandy and Yeung, P. Eric, Corporate Suppliers and Customers and Accounting Conservatism (November 1, 2011). Available at SSRN: http://ssrn.com/abstract=1426839 or http://dx.doi.org/10.2139/ssrn.1426839

Contact Information

Kai Wai Hui
Hong Kong University of Science & Technology - Department of Accounting ( email )
Clear Water Bay
Kowloon
Hong Kong
Sandy Klasa
University of Arizona - Department of Finance ( email )
McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-8761 (Phone)
P. Eric Yeung (Contact Author)
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
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