Accounting Conservatism and Managerial Incentives

• Main Author: KWON, Young Koan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2005
• Subjects: accounting conservatism; moral hazard; limited liability; agency costs; Accounting; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/150; https://ink.library.smu.edu.sg/context/soa_research/article/1149/viewcontent/KwonYK2005mnscAccountingConservation_pub.pdf
• Institution: Singapore Management University

There are two sources of agency costs under moral hazard: (1) distortions in incentive contracts and (2) implementation of suboptimal decisions. In the accounting literature, the relation between conservative accounting and agency costs of type (1) has received considerable attention (cf. Watts 2002...