Wu, Y.-H. orcid.org/0000-0003-2623-1766, Tsao, S.-M. and Lin, C.-H. (2025) Accounting conservatism, corporate diversification and firm value. Review of Quantitative Finance and Accounting, 64. pp. 371-415. ISSN 0924-865X
Abstract
This study investigates the impact of conservative financial reporting on corporate diversification, in order to explore whether accounting policy plays a role in mitigating agency problems associated with corporate decisions. Based on a sample of U.S. publicly listed firms in the period 2000–2017, this study initially reveals that diversification has an adverse effect on firm value. Our findings indicate that the increase in accounting conservatism leads to a subsequent reduction in the degree of corporate diversification. Additionally, the increase in accounting conservatism helps enhance the excess value attributed to diversification, suggesting that conservatism can alleviate the detrimental influence of diversification on firm value. Our results further indicate that the effect of accounting conservatism is more pronounced for firms with higher information asymmetry or poor corporate governance structure. Overall, the findings suggest that conservative accounting plays an effective monitoring role in disciplining management’s corporate strategies of diversification, and therefore, benefits shareholders and capital markets.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2024. This version of the article has been accepted for publication, after peer review (when applicable) and is subject to Springer Nature’s AM terms of use (https://www.springernature.com/gp/open-research/policies/accepted-manuscript-terms), but is not the Version of Record and does not reflect post-acceptance improvements, or any corrections. The Version of Record is available online at: https://doi.org/10.1007/s11156-024-01308-x. |
Keywords: | Accounting conservatism, Corporate diversifcation, Firm value, Agency cost, Information asymmetry |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 04 Jun 2024 09:54 |
Last Modified: | 12 Mar 2025 11:03 |
Status: | Published |
Publisher: | Springer |
Identification Number: | 10.1007/s11156-024-01308-x |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:213100 |
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