Antitakeover Legislation and Accounting Conservatism: New Evidence
51 Pages Posted: 19 Sep 2016
Date Written: September 17, 2016
We examine the effect of second-generation state antitakeover laws (ATLs) on accounting conservatism. We adopt a novel methodology that corrects for selection bias resulting from firms’ endogenous incorporation decision. Focusing on the period from when these ATLs became constitutional, we find a negative association between ATLs and conservatism. Our results suggest that ATLs decrease debtholder demand for conservatism by reducing agency costs of debt.
Keywords: State Antitakeover Laws, Accounting Conservatism, Debtholder Demand, Agency Costs of Debt
JEL Classification: M41, G3, K2
Suggested Citation: Suggested Citation