CEO Inside Debt and Accounting Conservatism

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)2131–2159
Journal / PublicationContemporary Accounting Research
Volume35
Issue number4
Online published22 Nov 2017
Publication statusPublished - Dec 2018

Abstract

We examine the relation between accounting conservatism and inside debt held by managers in the form of pension benefits and deferred compensation. We find that financial reporting is less conservative in firms whose CEOs hold more inside debt, particularly in firms with high default risk and agency costs of debt. This is consistent with our hypothesis that by aligning managerial incentives more closely with those of debtholders, inside debt reduces debtholders' expropriation concerns and thus their demand for accounting conservatism. Our results are robust to identification strategies addressing the endogeneity of CEO inside debt and to alternative measures of accounting conservatism.

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Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).

Citation Format(s)

CEO Inside Debt and Accounting Conservatism. / Wang, Cong; Xie, Fei; Xin, Xiangang.

In: Contemporary Accounting Research, Vol. 35, No. 4, 12.2018, p. 2131–2159.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review