Studying the Relationship between Institutional Ownership and Conservatism in Companies Accepted in Tehran Stock Exchange
Due to the problems of representatives, managers of companies might not use company resources to increase wealth of shareholders. Institutional shareholders, as the controlling mechanism of corporate governance, can use their voting power in active monitoring on company's procedures and operations and manager's decisions due to owning a considerable part of company stock. In this research, the attempt was made to determine effects of the presence of institutional owners on conservative accounting. In order to study these communications, Ball and Shivakumar's mode land Givoly and Hayn's regression models along with financial information of 60 companies from 2001 to 2010 were used. The results implied a positive relationship between institutional owners and profit conservatism using both of the mentioned models. Consequently, it could be claimed that these shareholders are active supervisors who encourage managers to report quality profit. Considering the dissimilarity of institutional investors’ motivations in monitoring accounting procedures of the company, different relationships of institutional ownership and conservatism were also studied in this research by categorizing institutional investors to active and inactive ones. The results demonstrated an inverse relationship between inactive institutional owners and conservatism using Ball and Shivakumar's model while this relationship was positive and direct in Givoly and Hayn's model. Also, a positive relationship was found between active institutional owners and profit conservatism in both Ball and Shivakumar's and Givoly and Hayn's models.
Volume (Year): 3 (2013)
Issue (Month): 1 (January)
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- Ball, Ray & Shivakumar, Lakshmanan, 2005. "Earnings quality in UK private firms: comparative loss recognition timeliness," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 83-128, February.
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- Richard J. Zeckhauser & John Pound, 1990. "Are Large Shareholders Effective Monitors? An Investigation of Share Ownership and Corporate Performance," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 149-180 National Bureau of Economic Research, Inc.
- Sanjeev Bhojraj & Partha Sengupta, 2003. "Effect of Corporate Governance on Bond Ratings and Yields: The Role of Institutional Investors and Outside Directors," The Journal of Business, University of Chicago Press, vol. 76(3), pages 455-476, July.
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- Farshid Navissi & Vic Naiker, 2006. "Institutional ownership and corporate value," Managerial Finance, Emerald Group Publishing, vol. 32(3), pages 247-256.
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