Does Accounting Conservatism Impede Corporate Innovation ? *

  title={Does Accounting Conservatism Impede Corporate Innovation ? *},
  author={Xin Chang and Jun-Koo Kang},
We examine the impact of accounting conservatism on corporate innovation. We find that firms that exhibit a higher degree of accounting conservatism generate fewer patents. Their patents also generate fewer citations and lower economic benefits. These effects of accounting conservatism on innovation are more pronounced when firms’ need for innovation is higher, when the product development cycle is longer, when managers have higher pay sensitivity to accounting performance, or when managers are… Expand

Tables from this paper

Does audit quality enhance or impede firm innovation?
Our baseline regressions show that audit quality has a negative effect on firm innovation. To address endogeneity, we use the Enron/Andersen collapse as a quasi-natural experiment for exogenousExpand
Institutional Investment Horizons and Corporate Innovation
This paper examines the impact of institutional investor’s investment horizons on corporate innovation. We conjecture that the presence of long-term institutional investors mitigates managerialExpand
The Influence of Corporate Social Responsibility on Investment Efficiency and Innovation
We examine two important channels through which corporate social responsibility (CSR) affects firm value: investment efficiency and innovation. We find that firms with higher CSR performance investExpand
Do Long‐Term Institutional Investors Foster Corporate Innovation?
This article examines the effect of institutional investors’ investment horizons on firms’ innovation activities. We conjecture that the presence of long-term institutional investors mitigatesExpand
Business Strategy, Accounting Conservatism and Company Innovation
This research is motivated by a debate about accounting conservatism. An important point of accounting conservatism is prudence in accounting reporting by managers. Several studies of conservatismExpand
Golden Handcuffs and Corporate Innovation: Evidence from Defined Benefit Pension Plans
This study examines the relation between employee incentives and corporate innovation. We find that firms with a higher defined benefit (DB) pension value secure more patents and patent citations. WeExpand
Bank Lending and Corporate Innovation: Evidence from SFAS 166/167
We provide new evidence on the role of bank lending in corporate innovation by exploiting the implementation of SFAS 166/167, which removed the off--balance sheet status of certain securitized assetsExpand
Corporate Innovation : Evidence from Defined Benefit Pension Plans
In this study, I exploit a natural experiment of defined benefit (DB) plans to identify the effects of deferred compensation on corporate innovation. Using DB pension and patenting data, I find thatExpand
FASB Interpretation Number 48 (FIN 48) Disclosures and Corporate Innovation
In this paper, we analyze the real effect of financial statement tax disclosures on corporate innovation activities. In 2007, the FASB enacted FIN 48, which mandates the separate and more detailedExpand
Motivating High‐Impact Innovation: Evidence from Managerial Compensation Contracts
We investigate the relationship between Chief Executive Officer (CEO) compensation and firm innovation and find that long‐term incentives in the form of options, especially unvested options,Expand


Accounting Conservatism and Board of Director Characteristics: an Empirical Analysis
Using three different measures of conservatism, we document that (i) the percentage of inside directors is negatively related to conservatism, and (ii) the percentage of outside directors'Expand
Managerial Ownership and Accounting Conservatism
In this paper we examine the effect of managerial ownership on financial reporting conservatism. Separation of ownership and control gives rise to agency problems between managers and shareholders.Expand
Accounting Quality and Firm-Level Capital Investment
This study examines how accounting quality relates to firm-level capital investment efficiency. Our first hypothesis is that higher quality accounting enhances investment efficiency by reducingExpand
Estimation and Empirical Properties of a Firm-Year Measure of Accounting Conservatism
We estimate a firm-year measure of accounting conservatism, examine its empirical properties as a metric, and illustrate applications by testing new hypotheses that shed further light on the natureExpand
The Dark Side of Analyst Coverage: The Case of Innovation
We examine the effects of financial analysts on the real economy in the case of innovation. Our baseline results show that firms covered by a larger number of analysts generate fewer patents andExpand
Executive incentives and the horizon problem: An empirical investigation
Abstract This paper investigates the hypothesis that CEOs in their final years of office manage discretionary investment expenditures to improve short-term earnings performance. We examine theExpand
Stylized facts indicate that small firms are responsible for a disproportionate share of innovative research. There are many possible explanations for this facto The paper seeks to understand thisExpand
Does Banking Competition Affect Innovation
We exploit the deregulation of interstate bank branching laws to test whether banking competition affects innovation. We find robust evidence that banking competition reduces state-level innovationExpand
Renegotiation, Investment Horizons, and Managerial Discretion
In this article, the authors show that the evolution of managerial entrenchment can distort investment horizons. Both myopic and hypermetropic distortions can arise. The direction of theseExpand
Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior
This paper develops a model of inefficient managerial behavior in the face of a rational stock market In an effort to mislead the market about their firms' worth, managers forsake good investments soExpand