Abstract
The objective of this study is to (1) re-examine the association between accounting conservatism and audit-firm tenure, (2) investigate the influences of audit committee characteristics on the association between accounting conservatism and audit-firm tenure, and (3) examine the impact of shareholder activism on the association between audit-firm tenure and accounting conservatism. Using two proxies for accounting conservatism (accrual-based and market-based measures), we find a negative relation between accounting conservatism and audit-firm tenure. We also find that the association between accounting conservatism and audit-firm tenure is weakened in firms with more audit committee members being more than 65 years old and higher level of shareholder activism. The results indicate that firms can reduce the effect of long audit firm tenure when the firms have more experienced audit committee member and more shareholder activism. Our study extends the current literature on audit committee and shareholder activism. The current study is also of interest to firms, regulators, and investors.
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