The Influence of Conditional Conservatism on Ownership Dispersion: An International Analysis

Revista Española de Financiación y Contabilidad, Forthcoming

29 Pages Posted: 26 Dec 2012

See all articles by Begoña Giner

Begoña Giner

University of Valencia

Ahmed Tahoun

London Business School

Martin Walker

University of Manchester - Manchester Business School

Date Written: December 25, 2012

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.

Keywords: Conditional conservatism, Asymmetric reporting, Ownership diversification, Diversification opportunities, Governance and information problems

JEL Classification: G32, M41

Suggested Citation

Giner Inchausti, Begoña and Tahoun, Ahmed and Walker, Martin, The Influence of Conditional Conservatism on Ownership Dispersion: An International Analysis (December 25, 2012). Revista Española de Financiación y Contabilidad, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2193798

Begoña Giner Inchausti (Contact Author)

University of Valencia ( email )

Departament de Comptabilitat Edifici Departamental Oriental
E-46022 Valencia
Spain

Ahmed Tahoun

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Martin Walker

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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