ISSN: 2225-8329
Open access
Due to the problems of representatives, managers of companies might not use company resources to increase wealth of shareholders. Institutional shareholders, as the controlling mechanism of corporate governance, can use their voting power in active monitoring on company's procedures and operations and manager's decisions due to owning a considerable part of company stock. In this research, the attempt was made to determine effects of the presence of institutional owners on conservative accounting. In order to study these communications, Ball and Shivakumar's mode land Givoly and Hayn's regression models along with financial information of 60 companies from 2001 to 2010 were used. The results implied a positive relationship between institutional owners and profit conservatism using both of the mentioned models. Consequently, it could be claimed that these shareholders are active supervisors who encourage managers to report quality profit. Considering the dissimilarity of institutional investors’ motivations in monitoring accounting procedures of the company, different relationships of institutional ownership and conservatism were also studied in this research by categorizing institutional investors to active and inactive ones. The results demonstrated an inverse relationship between inactive institutional owners and conservatism using Ball and Shivakumar's model while this relationship was positive and direct in Givoly and Hayn's model. Also, a positive relationship was found between active institutional owners and profit conservatism in both Ball and Shivakumar's and Givoly and Hayn's models.
Ajinkya, B., Bhojraj, S., and Sengupta, P. (2005). "The association between Outsider Directors and Institutional Investors and the Properties of Management Earnings Forecasts" journal of accounting research No. 43, vol. 3 June: 343-376.
Almazan, A., Hartzell, J., Starks, L.T., (2005). "Active institutional shareholders and cost of monitoring: Evidence from managerial compensation". Working paper, University of Texas at Austin.
Ball, R., and Shivakumar, L. (2005). "Earnings quality in UK private firms: comparative loss recognitiontimeliness". Journal of Accounting and Economics 39 (1): 83-128.
Bhojraj, S., and Sengupta, P. (2003). Effect of corporate governance on bond ratings and yields: The role of institutional investors and outside directors. The Journal of Business, 76(3): 455-475.
Bushee, B. J. (1998). The influence of institutional investors on myopic R&D investment behavior. Accounting Review, 73 (July): 305-334.
Chi, Wuchun, liu, Chiawen and Wang, Taychang. (2009). "What Affects Accounting Conservatism: A Corporate Governance Perspective". Journal of Contemporary Accounting & Economics.
Cornett, M. M., Marcus, A., Tehranian, H., and Saunders, A. (2007). "The impact of institutional ownership on corporate operating performance", Journal of Banking & Finance, 31, 1771– 1794.
Givoly, D., & Hayn, C. (2000). ”The Changing Time-series Properties of Earning, Cash Flows and Accruals: Has Financial Reporting Become More Conservatism?”; Journal of Accounting and Economics; vol. 29; pp. 287-320.
Hassas Yeganeh, Y., Moradi, M., Eskandar, H. (2008). “Studying the relationship between institutional investors and company value”, Accounting and Auditing Studies, 52, pp. 107-122.
Jung, K., and Kown, S. Y. (2002). "Ownership Structure and Earnings Informativeness: Evidence from Korea", the International Journal of Accounting, 37: 301-32.
Kordestani, Gh. R., Beigi, A., Langeroudi, H. (2008). “Conservatism in Financial Reporting: The Relation between Asymmetric Timeliness of Earnings and MTB Ratio”, Iranian Accounting and Auditing Studies; 15(52); 89-106, Summer.
Kordlar, A. (2007). “Corporate Governance System and Role of Institutional Shareholders in it”, Accounting Science and Research Quarterly, 3rd year, no. 8, 1-6.
Marfu, A. (2006). "Relationship of Non-duty Members with Board of Directors and Institutional Investors with Profit Forecasts", MA thesis, Allameh Tabatabai University.
Modares, A., Hosseini, S. M., Raeisi, Z. (2009). “Analysis of the Effect of Institutional Shareholders as a Criterion of Corporate Governance on Efficiency of Companies Accepted in Tehran Stock Exchange”, Economical Bulletin, no. 5, 223-250.
Moradi, M. (2007). “Relationship between institutional investors and profit quality”, MA thesis in Accounting, Faculty of Management, University of Tehran.
Noravesh, I., and Kordlar, A. (2006). “Review and Explanation of the Relationship between Shareholders and Asymmetric Information and Advantage of Performance Accounting Standards", Journal of Accounting and Auditing Review, 42 (winter), pp. 124-97.
Potter, G. (1992). "Accounting Earnings Announcements, Institutional Investor Concentration, and Common Stock Returns," Journal Accounting Research, spring: 146-155.
Velury, U., and Jenkins, D. S. (2006)."Institutional Ownership and the Quality of Earnings", Journal of Business Research, 59: 1043-1051.
Watts, R. L. (2003a). “Conservatism in Accounting Part I: Explanations and Implications”; Accounting Horizons; pp. 207-221.
Watts, R. L. (2003b). ”Conservatism in Accounting Part II: Evidence and Research Opportunities”; Accounting Horizons; pp. 287-301.
Zeckhauser, R. J., and Pound, J. (1990). Are Large Shareholders Effective Monitors? An Investigation of Share Ownership and Corporate Performance. In: Hubbard, R.G. (Ed.), Asymmetric Information, Corporate Finance and Investment. University of Chicago Press, Chicago, pp. 149-180.
In-Text Citation: (Moghaddam et al., 2013)
To Cite this Article: Moghaddam, A., Amirzadeh, V., & Heidari, A. A. (2013). Studying the Relationship between Institutional Ownership and Conservatism in Companies Accepted in Tehran Stock Exchange. International Journal of Academic Research in Accounting Finance and Management Sciences, 3(1), 424- 435.
Copyright: © 2021 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode