Relationship between Ultimate Ownership and Earnings Conservatism in listed Companies of Tehran Stock Exchange

Document Type : Research Paper



The conflict of interest between managers and stockholders is one of the salient matters in economics, finance and accounting. One of the ways for resolving this conflict is the timely loss recognition. Many factors have impact on timely loss recognition. In this paper, we investigated the effect of ownership structure on Earnings conservatism, and analyzed whether the extent of timely loss recognition shown by firms with a controlling owner for the purpose of decreasing the information asymmetries depends on 1) the ownership share of controlling owner and 2) the divergence between controlling owner's voting and cash flow rights. In this paper, we have used an extension of the regression proposed by Basu (1997) for analyzing the data and 56 companies during 2005-09 from database. In general, our results document a negative relationship between the ownership share of controlling owner and the level of earnings conservatism and this result is consistent with the reduction of external contracting. In addition, we also find a negative relationship between earnings conservatism and the divergence of controlling owner's voting and cash flow rights. By increasing this divergence, firm is confronted with higher costs of external contracting.


- رحمانی، علی، و غلام‌زاده، مسعود (1388)، مالکیت عمومی در بازار سرمایه و محافظه‌کاری در گزارشگری مالی، تحقیقات حسابداری و حسابرسی، شماره 4، ص‌ 18-1
- رضازاده، جواد، و آزاد، عبدالله (١۳٨۷)، رابطه بین عدم تقارن اطلاعاتی و محافظه‌کاری در گزارشگری مالی، بررسیهای حسابداری و حسابرسی، شماره ۵4، ‌ص 63-80.
- قائمی، محمدحسین؛ ودیعی، محمدحسین، و حاجی‌پور، میثم (1389)، تأثیر محافظه‌کاری بر پایداری سود و نسبت قیمت به سود، دانش حسابداری،  سال اول، شماره 2، ص 73-55
- کردستانی، غلامرضا؛ امیربیگی، حبیب (١۳٨7)، محافظه‌کاری در گزارشگری مالی: بررسی رابطه عدم تقارن زمانی سود، MTB به عنوان دو معیار ارزیابی محافظه‌کاری، بررسیهای حسابداری و حسابرسی، شماره ۵2، ص‌. 89 تا 106.
- مرادزاده، مهدی؛ ناظمی اردکانی، مهدی؛ غلامی، رضا، و فرزانی، حجت اله، (1388)، بررسی رابطه بین مالکیت نهادی سهام و مدیریت سود در شرکتهای پذیرفته شده در بورس اوراق بهادار تهران، بررسیهای حسابداری و حسابرسی، شماره 55، ص 98-85
- مهرانی، کاوه، حلاج، محمد، و حسنی، عباس (1388)، بررسی محافظه‌کاری در سود حسابداری و رابطه آن با اقلام تعهدی در بورس اوراق بهادار تهران، تحقیقات حسابداری، شماره 3، ‌ص. 107-88.
- نصرالهی، زهرا؛ عارف‌منش، زهره. (1389)، بررسی رابطه مالکیت و کیفیت سود در شرکتهای پذیرفته شده در بورس اوراق بهادار تهران، دانش حسابداری، سال اول، شماره 3، ص 138-117
- Ball, R. and Shivakumar, L, (2005). Earnings quality in UK private firms: Comparative loss recognition timeliness, Journal of accounting and Economics, Vol. 39, No. 1, pp. 83-128.
- Ball, R., Kothari, S. and Robin, A. (2000). The effect of international institutional factors on properties of accounting earnings, Journal of Accounting and Economics, Vol. 29, pp. 1-51.
- Ball, R., Robin, A. and Wu, J.S. (2003), Incentives versus standards: properties of accounting income in four East Asian countries and implications for acceptance of IAS, Journal of Accounting and Economics, Vol. 36, pp. 235–270.
- Basu, S. (1997), The conservatism principle and the Asymmetric timeliness of earnings, Journal of Accounting and Economics, Vol. 24, No. 1.
- Bushman, R., Piotroski, J. and Smith, A. (2006) Capital allocation and timely accounting recognition of economic losses, Working Paper, University of North Carolina and University of Chicago.
- Chalmers, K. and Godfrey, J.M. (2004), Reputation costs: the impetus for voluntary derivative financial instrument reporting, Accounting, Organizations and Society, Vol.29, pp. 95-125.
- Dargenidou, C., McLeay, S. and Raonic, I., (2007), Ownership, investor protection and earnings expectations, Journal of Business Finance and Accounting, Vol. 34, No. (1-2), pp. 247-268.
- Du, J. and Dai, Y. (2005), Ultimate corporate ownership structures and capital structures: evidence from East Asian economies, Corporate Governance: An International Review, Vol. 13, No. 1, pp. 60-71.
- Fan, J.P.H. and Wong, T.J. (2002) Corporate ownership structure and the informativeness of accounting earnings in East Asia, Journal of Accounting and Economics, Vol. 33, pp. 401-425.
- Haw, I., Hu, B., Hwang, L. and Wu, W. (2004).Ultimate ownership, income management, and legal and extra-legal  institutions, Journal of Accounting Research, Vol. 42, pp. 423-462.
- Jung, K. and Kwon, S.Y. (2002) Ownership structure and earnings informativeness: Evidence from Korea, International Journal of Accounting, Vol. 37, pp. 301–325.
- La Porta, R., López-de-Silanes, F. and Shleifer, A. (1999) Corporate ownership around the world, The Journal of Finance, Vol. 54, pp. 471-517.
- LaFond, R. (2005) The influence of ownership structure on earnings conservatism and the informativeness of stock prices: an international comparison, working paper, sloan school of  management.
- LaFond, R. and Roychowdhury, S., (2008), Managerial ownership and accounting conservatism, Journal of Accounting Research, Vol. 46, No. 1.
- LaFond, R., and Watts, R., (2008), The Information Role of Conservatism, The Accounting Review, No. 83, No. 2.
- Mu Haw, Simon Ho, Tong, Y., Zhang, F. (2009).Complex ownership structures and accounting conservatism, Working paper, texas christian university.
- Peek E., Buijink, W. and Coppens, L. (2009) Accounting conservatism in the European Union: The influence of institutions and incentives, Contemporary Accounting Research, Forthcoming.
- Roychowdhury, S., and Watts, R. (2007). Asymmetric timeliness of earnings, market to book and conservatism in financial reporting, Journal of Accounting and Economics, Vol. 44, No. 1.
- Sanchez, C., Aleman, J., Martin, D., (2009). Ultimate Ownership and Earnings conservatism, European Accounting Review, Forthcoming
- Watts, R.(2003). Conservatism in accounting part Ι and II: explanations and implications, accounting horizons, Vol. 17, No. 3.