Is conservative reporting attractive to foreign institutional investors? Evidence from an emerging market

Yilmaz Yildiz, Mehmet Baha Karan, Aydin Ozkan

Research output: Contribution to journalArticle

Abstract

This study investigates the relation between conservative reporting and foreign institutional ownership using a unique dataset of firms in Turkey. In doing so, we distinguish between foreign funds and corporations. Contrary to prior findings, our analysis shows that conservative reporting is not necessarily a desirable accounting feature for foreign institutional investors. We also find that the interplay between conservative reporting and ownership is significantly different between foreign funds and corporations. The estimated negative relation holds only for foreign funds. Further analysis reveals that foreign funds do not find conservative reporting desirable in low-asymmetric information firms and reduce ownership with greater accounting conservatism in such firms. The analysis sheds significant lights on the relevance of conservative reporting in alleviating the negative consequences of asymmetric information.
LanguageEnglish
Pages1099-1121
Number of pages23
JournalEuropean Journal of Finance
Volume25
Issue number12
Early online date1 Jan 2019
DOIs
Publication statusPublished - 13 Aug 2019

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Institutional investors
Emerging markets
Ownership
Asymmetric information
Institutional ownership
Turkey
Accounting conservatism

Cite this

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Is conservative reporting attractive to foreign institutional investors? Evidence from an emerging market. / Yildiz, Yilmaz; Karan, Mehmet Baha; Ozkan, Aydin.

In: European Journal of Finance, Vol. 25, No. 12, 13.08.2019, p. 1099-1121.

Research output: Contribution to journalArticle

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