Abstract
Ownership structures vary among entities. These different ownership structures can result in variation in governance structures, which would reflect the different rights associated with various types of owners. These governance structures in turn could lead a greater or lesser degree of influence over the financial reporting process by large owners and/or managers. In this sense, existing literature suggests that conservatism is related to institutional ownership. For a sample of 26 non-financial listed Portuguese firms-year from 2002 to 2017, we examine the association between accounting conservatism and institutional ownership. The study’s results show that the coefficient institutional ownership variable is positive but not statistically significant. Thus, it is not possible to conclude that monitoring institutions are an important class of investors that demands conservatism as a governance device.
Highlights
The separation of ownership and control results in information asymmetry and potential conflict of interests between management and shareholders (Jensen & Meckling, 1976; Fama, 1980)
It is not possible to conclude that monitoring institutions are an important class of investors that demands conservatism as a governance device
Ahmed et al (2002), Sun and Lin (2011) and Alves (2019) find that large firms are more conservative in accounting choices. 3.4 Regression Model We evaluate the association between institutional ownership and accounting conservatism by estimating the following OLS regression: Conservatismit = β0 + β1 (Institutionalit) + β2 (Auditit) + β3 (Leverageit) + β4 (Profitit) + β 5 (Sizeit)
Summary
International Journal of Accounting and Finance Studies Vol 4, No 1, 2021 www.scholink.org/ojs/index.php/ijafs ISSN 2576-2001 (Print) ISSN 2576-201X (Online). Does Institutional Ownership Affect Accounting Conservatism in Portuguese Capital Market?. Sandra Alves School of Accounting and Administration, University of Aveiro, Aveiro, Portugal. Received: December 6, 2020 Accepted: December 24, 2020 Online Published: January 16, 2021 doi:10.22158/ijafs.v4n1p17
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