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Accounting conservatism in a setting of Information Asymmetry between majority and minority shareholders

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  • Chi, Wuchun
  • Wang, Chenchin

Abstract

Following LaFond and Watts (2008), we examine the relation between information asymmetry (as measured by PIN, probability of information-based trading) and accounting conservatism but focus on a country - Taiwan - whose institutional background is different from that of the United States. Due to the disparate degree of conservatism across the world, the conclusions of LaFond & Watts (2008) might not be universally applicable. Our findings support, in general, the applicability of their conclusion to a Taiwan data set. We find, however, that the effect of PIN appears weaker when auditor tenure is taken into account, thus supplementing their conclusions.

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  • Chi, Wuchun & Wang, Chenchin, 2010. "Accounting conservatism in a setting of Information Asymmetry between majority and minority shareholders," The International Journal of Accounting, Elsevier, vol. 45(4), pages 465-489, December.
    • Handle: RePEc:eee:accoun:v:45:y:2010:i:4:p:465-489
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    2. Kousenidis, Dimitrios V. & Ladas, Anestis C. & Negakis, Christos I., 2014. "Accounting conservatism quality of accounting information and crash risk of stock prices," The Journal of Economic Asymmetries, Elsevier, vol. 11(C), pages 120-137.

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