Managerial conservatism and corporate policies

Managerial cash use, default, and corporate financial policies

Article history: Received 17 January 2014 Received in revised form 28 May 2014 Accepted 29 May 2014 Available online 12 June 2014 This article investigates the impact of the observation that managers can use cash to defer bankruptcy on default risk and corporate financial policies. I show that with managerial cash use to defer default, the impact of cash on default risk depends on two opposing ...

Innovation and Corporate Conservatism∗

In this paper, we study firms’ incentives to promote innovation. We analyze a situation in which an employee in a firm can invest in discovering new ideas. An innovative employee has to decide whether to disclose his idea within the firm, to maintain the status-quo by not implementing it, or to form a spin-out firm. In a framework in which intellectual property rights are not perfect, a contrac...

Effects of corporate governance and managerial optimism on accounting conservatism and manipulation∗

We develop a model to analyze how corporate governance and managerial optimism affect firms’financial reporting choices, and managers’incentives to manipulate accounting reports. Conservative accounting is advantageous because it enables boards to act on bad news and block investment ideas that are unattractive to shareholders but attractive to management. This feature of conservatism, however,...

Managerial Optimism and Corporate Finance

Corporate Governance, Accounting Conservatism, and Manipulation

Prior studies have portrayed accounting conservatism as a tool that enables boards to perform their monitoring duties. We develop a model that suggests that the empirical association between conservatism and governance can also run in the opposite direction —only well-governed firms with suffi cient monitoring in place can fully utilize the benefits of conservative accounting. In our setting, c...