Abstract
This study investigates how foreign institutional ownership interacts with accounting conservatism in an emerging market setting. We posit that weak investor protection and a high degree of information asymmetry between insiders and outside investors increase demand for conservative reporting in firms operating in emerging markets. Foreign investors in this setting have informational disadvantages relative to their domestic peers and have difficulties in getting access to data. Using a sample of Turkish firms, we find that foreign institutions (particularly foreign corporate investors) demand more conservative reporting in the investee firms. Moreover, we show that this association is more pronounced among firms with greater asymmetric information problems and growth opportunities. Our additional tests reveal that the direction of causality flows from foreign institutional ownership to conservatism, and not vice versa.
| Original language | English |
|---|---|
| Number of pages | 27 |
| Journal | Review of Quantitative Finance and Accounting |
| Early online date | 10 Sep 2019 |
| DOIs | |
| Publication status | E-pub ahead of print - 10 Sep 2019 |
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Foreign institutional ownership and demand for accounting conservatism : evidence from an emerging market. / Khalil, Mohamed; Ozkan, Aydin; Yildiz, Yilmaz.
In: Review of Quantitative Finance and Accounting, 10.09.2019.Research output: Contribution to journal › Article
TY - JOUR
T1 - Foreign institutional ownership and demand for accounting conservatism
T2 - evidence from an emerging market
AU - Khalil, Mohamed
AU - Ozkan, Aydin
AU - Yildiz, Yilmaz
PY - 2019/9/10
Y1 - 2019/9/10
N2 - This study investigates how foreign institutional ownership interacts with accounting conservatism in an emerging market setting. We posit that weak investor protection and a high degree of information asymmetry between insiders and outside investors increase demand for conservative reporting in firms operating in emerging markets. Foreign investors in this setting have informational disadvantages relative to their domestic peers and have difficulties in getting access to data. Using a sample of Turkish firms, we find that foreign institutions (particularly foreign corporate investors) demand more conservative reporting in the investee firms. Moreover, we show that this association is more pronounced among firms with greater asymmetric information problems and growth opportunities. Our additional tests reveal that the direction of causality flows from foreign institutional ownership to conservatism, and not vice versa.
AB - This study investigates how foreign institutional ownership interacts with accounting conservatism in an emerging market setting. We posit that weak investor protection and a high degree of information asymmetry between insiders and outside investors increase demand for conservative reporting in firms operating in emerging markets. Foreign investors in this setting have informational disadvantages relative to their domestic peers and have difficulties in getting access to data. Using a sample of Turkish firms, we find that foreign institutions (particularly foreign corporate investors) demand more conservative reporting in the investee firms. Moreover, we show that this association is more pronounced among firms with greater asymmetric information problems and growth opportunities. Our additional tests reveal that the direction of causality flows from foreign institutional ownership to conservatism, and not vice versa.
KW - Accounting conservatism
KW - Foreign ownership
KW - Institutional investors
KW - Emerging market
UR - http://www.scopus.com/inward/record.url?scp=85073944281&partnerID=8YFLogxK
U2 - 10.1007/s11156-019-00834-3
DO - 10.1007/s11156-019-00834-3
M3 - Article
JO - Review of Quantitative Finance and Accounting
JF - Review of Quantitative Finance and Accounting
SN - 0924-865X
ER -