IDEAS home Printed from https://ideas.repec.org/a/jfr/afr111/v4y2015i1p112.html
   My bibliography  Save this article

The Impact of Audit Committee and Shareholder Activism on the Association between Audit-Firm Tenure and Accounting Conservatism

Author

Listed:
  • Mai Dao
  • Hassan R. HassabElnaby
  • Amal Said

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.

Suggested Citation

  • Mai Dao & Hassan R. HassabElnaby & Amal Said, 2015. "The Impact of Audit Committee and Shareholder Activism on the Association between Audit-Firm Tenure and Accounting Conservatism," Accounting and Finance Research, Sciedu Press, vol. 4(1), pages 112-112, February.
  • Handle: RePEc:jfr:afr111:v:4:y:2015:i:1:p:112
    as

    Download full text from publisher

    File URL: https://www.sciedupress.com/journal/index.php/afr/article/download/5953/3704
    Download Restriction: no

    File URL: https://www.sciedupress.com/journal/index.php/afr/article/view/5953
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Karpoff, Jonathan M. & Malatesta, Paul H. & Walkling, Ralph A., 1996. "Corporate governance and shareholder initiatives: Empirical evidence," Journal of Financial Economics, Elsevier, vol. 42(3), pages 365-395, November.
    2. Ryan, Sg, 1995. "A Model Of Accrual Measurement With Implications For The Evolution Of The Book-To-Market Ratio," Journal of Accounting Research, Wiley Blackwell, vol. 33(1), pages 95-112.
    3. Ahmed, Anwer S. & Duellman, Scott, 2007. "Accounting conservatism and board of director characteristics: An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 411-437, July.
    4. Jenkins, David S. & Velury, Uma, 2008. "Does auditor tenure influence the reporting of conservative earnings?," Journal of Accounting and Public Policy, Elsevier, vol. 27(2), pages 115-132.
    5. Irene Karamanou & Nikos Vafeas, 2005. "The Association between Corporate Boards, Audit Committees, and Management Earnings Forecasts: An Empirical Analysis," Journal of Accounting Research, Wiley Blackwell, vol. 43(3), pages 453-486, June.
    6. Wahal, Sunil, 1996. "Pension Fund Activism and Firm Performance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(1), pages 1-23, March.
    7. Ray Ball & S. P. Kothari & Valeri V. Nikolaev, 2013. "Econometrics of the Basu Asymmetric Timeliness Coefficient and Accounting Conservatism," Journal of Accounting Research, Wiley Blackwell, vol. 51(5), pages 1071-1097, December.
    8. Ryan, Sg, 1995. "A Model Of Accrual Measurement With Implications For The Evolution Of The Book-To-Market Ratio (Vol 33, Pg 95, 1995)," Journal of Accounting Research, Wiley Blackwell, vol. 33(2), pages 417-417.
    9. Dechow, Patricia M., 1994. "Accounting earnings and cash flows as measures of firm performance : The role of accounting accruals," Journal of Accounting and Economics, Elsevier, vol. 18(1), pages 3-42, July.
    10. De Bondt, Werner F M & Thaler, Richard H, 1990. "Do Security Analysts Overreact?," American Economic Review, American Economic Association, vol. 80(2), pages 52-57, May.
    11. Smith, Michael P, 1996. "Shareholder Activism by Institutional Investors: Evidence for CalPERS," Journal of Finance, American Finance Association, vol. 51(1), pages 227-252, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    2. Renneboog, L.D.R. & Szilagyi, P.G., 2009. "Shareholder Activism through the Proxy Process," Other publications TiSEM cc25d736-2965-4511-b100-1, Tilburg University, School of Economics and Management.
    3. Lily Qiu, 2005. "Managerial Reputation Concerns, Outside Monitoring, and Investment Efficiency," Working Papers 2005-08, Brown University, Department of Economics.
    4. Zhang, Bobo & Zhang, Zhou, 2022. "Shining light on corporate political spending: Evidence from shareholder engagements," International Review of Law and Economics, Elsevier, vol. 70(C).
    5. Bajzik, Josef & Havranek, Tomas & Irsova, Zuzana & Novak, Jiri, 2023. "Does Shareholder Activism Create Value? A Meta-Analysis," EconStor Preprints 272232, ZBW - Leibniz Information Centre for Economics.
    6. Nicole Boyson & Robert Mooradian, 2011. "Corporate governance and hedge fund activism," Review of Derivatives Research, Springer, vol. 14(2), pages 169-204, July.
    7. Wang, Yong & Mao, Connie X., 2015. "Shareholder activism of public pension funds: The political facet," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 138-152.
    8. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 1998. "Relative valuation roles of equity book value and net income as a function of financial health," Journal of Accounting and Economics, Elsevier, vol. 25(1), pages 1-34, February.
    9. Hadani, Michael & Goranova, Maria & Khan, Raihan, 2011. "Institutional investors, shareholder activism, and earnings management," Journal of Business Research, Elsevier, vol. 64(12), pages 1352-1360.
    10. Clifford, Christopher P., 2008. "Value creation or destruction? Hedge funds as shareholder activists," Journal of Corporate Finance, Elsevier, vol. 14(4), pages 323-336, September.
    11. James M. Forjan, 1999. "The wealth effects of shareholder‐sponsored proposals," Review of Financial Economics, John Wiley & Sons, vol. 8(1), pages 61-72.
    12. Park, Yun W. & Shin, Hyun-Han, 2004. "Board composition and earnings management in Canada," Journal of Corporate Finance, Elsevier, vol. 10(3), pages 431-457, June.
    13. Renneboog, Luc & Szilagyi, Peter G., 2011. "The role of shareholder proposals in corporate governance," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 167-188, February.
    14. Kim, Woochan & Kim, Woojin & Kwon, Kap-Sok, 2009. "Value of outside blockholder activism: Evidence from the switchers," Journal of Corporate Finance, Elsevier, vol. 15(4), pages 505-522, September.
    15. Zhijun Lin & Ming Liu & Carlos Noronha, 2016. "The Impact of Corporate Governance on Informative Earnings Management in the Chinese Market," Abacus, Accounting Foundation, University of Sydney, vol. 52(3), pages 568-609, September.
    16. García Lara, Juan Manuel & García Osma, Beatriz & Penalva, Fernando, 2016. "Accounting conservatism and firm investment efficiency," Journal of Accounting and Economics, Elsevier, vol. 61(1), pages 221-238.
    17. Suto, Megumi, 2000. "New development in the Japanese corporate governance in the 1990s – The role of corporate pension funds," HWWA Discussion Papers 100, Hamburg Institute of International Economics (HWWA).
    18. Chung, Richard & Firth, Michael & Kim, Jeong-Bon, 2002. "Institutional monitoring and opportunistic earnings management," Journal of Corporate Finance, Elsevier, vol. 8(1), pages 29-48, January.
    19. Simon Rafaqat & Sana Rafaqat & Sahil Rafaqat & Saoul Rafaqat & Dawood Rafaqat, 2023. "Shareholder Activism and Firm Performance: A Review," Journal of Economics and Behavioral Studies, AMH International, vol. 14(4), pages 31-41.
    20. Martin Gold, 2010. "Fiduciary Finance," Books, Edward Elgar Publishing, number 13813.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jfr:afr111:v:4:y:2015:i:1:p:112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sciedu Press (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.