Manager Optimism Based on Environmental Uncertainty and Accounting Conservatism
It is expected that more accounting conservation (environmental uncertainty) reduces manager optimism. Prior research, however, has struggled to establish this relation empirically. Moreover, some evidence points to the possibility that the manager optimism is lower for firms with more accounting conservation. In this paper, the author examine the link between accounting conservation, environmental uncertainty, and manager optimism, as well as the link between accounting conservation, manager optimism, and the cost of capital. First, it is established that more accounting conservation could lead to a decrease in manager optimism. Second, I tried to show that manager optimism changes the cost of capital in the accounting conservation quintile. Consistent with a negative relationship between accounting conservation and manager optimism, and with the dominating effect of managers' optimism , the article documented a positive association between managers' optimism and the cost of capital for firms whose shares trade in low accounting conservation.
The Role of Environmental Uncertainty, Financial Constraints and Accounting Conservatism in Limiting the Performance Outcomes Due to Manager Overconfidence
Objective: The excessive self-esteem of managers leads to postponing bad news due to weaknesses in performance, and conservatism can be a factor in modifying it. In this paper, the purpose is to examine the role of accounting conservatism in limiting the functional outcomes results from overconfidence managers. Methods: The data of the companies listed in the Tehran Stock Exchange for the peri...متن کامل
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,...متن کامل
Cost-benefit analysis (CBA) is controversial for environmental issues, but is nevertheless employed by many governments and private organizations for making environmental decisions. Controversy centers on the practice of economic discounting in CBA for decisions that have substantial long-term consequences, as do most environmental decisions. Customarily, economic discounting has been calculate...متن کامل
I address the interaction between accounting conservatism and real options in both a staged investment and abandonment model. An accounting policy biased towards classifying a Good (Bad) project as Bad (Good) is conservative (aggressive). The accounting signal is optimally conservative when the ex ante unconditional expected terminal value is less than the second investment (staged investment) ...متن کامل
Using a large sample of listed firms from 17 European countries that mandatorily adopted IFRS over the period 2005-2008, we examine the effect of mandatory IFRS adoption on accounting conservatism defined using Basu’s (1997) differential timeliness (DT) measure. An important distinction of our study is that we avoid the common criticisms of the DT measure by comparing the difference in the DT m...متن کامل
دوره 14 شماره 1
صفحات 61- 86
تاریخ انتشار 2021-01-01
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