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- Title
Accounting conservatism and common ownership by dedicated institutional blockholders.
- Authors
Cheng, C. S. Agnes; Li, Xiaohui; Xie, Jing; Zhong, Yuxiang
- Abstract
We examine the peer effects of accounting conservatism in a common dedicated institutional blockholder (CDIB) setting. We find a positive correlation in accounting conservatism between focal firms and their CDIB peers. To corroborate our main findings, we document that the peer effect is stronger for firms connected through CDIBs that are activists or that have more active shares, for firms with larger CDIB ownership and for firms with weaker corporate governance mechanisms and higher information asymmetry. The results suggest that managers view following peer firms' conservatism as a way of pleasing CDIBs. We also find that in proxy voting, firms receive less support from their investors when their conservatism deviates more from their CDIB peers. Finally, we find that the CDIB peer effect remains significant after controlling for the effect of industry and local peers. Overall, our paper presents evidence consistent with firms adapting their accounting conservatism in response to their incumbent dedicated institutional investors' preference.
- Subjects
CONSERVATISM (Accounting); INSTITUTIONAL ownership (Stocks); ACCOUNTING firms; INVESTORS; INSTITUTIONAL investors; INFORMATION asymmetry
- Publication
Journal of Business Finance & Accounting, 2023, Vol 50, Issue 9/10, p1943
- ISSN
0306-686X
- Publication type
Article
- DOI
10.1111/jbfa.12681