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Board of Directors' Characteristics and Conditional Accounting Conservatism: Spanish Evidence


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  • Juan Manuel Garcia Lara
  • Beatriz Garcia Osma
  • Fernando Penalva


Using a sample of Spanish listed firms for the period 1997-2002 we find that firms where the CEO has a low influence over the functioning of the board of directors show a greater degree of accounting conservatism. We measure the influence of the CEO over the board of directors using two aggregate indexes combining six (eight) characteristics of the functioning of the board of directors and its monitoring committees: board size, proportion of non-executive directors, proportion of independent directors, whether the chairman of the board is an executive director, the number of board meetings, and the existence of an audit committee, a nomination/remuneration committee and an executive committee. We define conservatism as the asymmetric recognition speed of good and bad news in earnings, and we measure it following Basu (Journal of Accounting and Economics, 24, pp. 3-37, 1997) and Ball and Shivakumar (Journal of Accounting and Economics, 39, pp. 83-128, 2005). Our results are robust to alternative specifications and specific controls for investment opportunities and for the endogenous nature of corporate governance and earnings quality. Overall, our evidence shows that firms with strong boards use conservative accounting numbers as a governance tool, even in an institutional setting with low litigation risk such as Spain.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal European Accounting Review.

Volume (Year): 16 (2007)
Issue (Month): 4 ()
Pages: 727-755

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Handle: RePEc:taf:euract:v:16:y:2007:i:4:p:727-755

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Cited by:
  1. Antti Rautiainen, 2010. "Contending legitimations: Performance measurement coupling and decoupling in two Finnish cities," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 23(3), pages 373-391, March.
  2. Wan-Hussin, Wan Nordin, 2009. "The impact of family-firm structure and board composition on corporate transparency: Evidence based on segment disclosures in Malaysia," The International Journal of Accounting, Elsevier, vol. 44(4), pages 313-333, December.
  3. C. Piot & L. Kermiche, 2009. "A quoi servent les comités d'audit ? Un regard sur la recherche empirique," Post-Print halshs-00537952, HAL.
  4. Iatridis, George Emmanuel, 2011. "Accounting disclosures, accounting quality and conditional and unconditional conservatism," International Review of Financial Analysis, Elsevier, vol. 20(2), pages 88-102, April.
  5. Laura Arnedo & Fermín Lizarraga & Santiago Sánchez, 2012. "The role of accounting accruals for the prediction of future cash flows: evidence from Spain," SERIEs, Spanish Economic Association, vol. 3(4), pages 499-520, December.
  6. Yu Chen & Zabihollah Rezaee, 2012. "The role of corporate governance in convergence with IFRS: evidence from China," International Journal of Accounting and Information Management, Emerald Group Publishing, vol. 20(2), pages 171-188.
  7. Jerry Sun & Guoping Liu, 2011. "The effect of analyst coverage on accounting conservatism," Managerial Finance, Emerald Group Publishing, vol. 37(1), pages 5-20, January.
  8. Dariush Foroghi & Hadi Amiri & Zahra Nokhbeh Fallah, 2013. "Corporate Governance and Conservatism," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(4), pages 61-71, October.
  9. Rahimah Mohamed Yunos Author_Email: & Malcolm Smith & Zubaidah Ismail & Syahrul Ahmar Ahmad, 2011. "Inside Concentrated Owners, Board Of Directors And Accounting Conservatism," Annual Summit on Business and Entrepreneurial Studies (ASBES 2011) Proceeding 2011-053-178, Conference Master Resources.


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