Work

The role of accounting conservatism in corporate innovation

Year: 2024

Type: article

Abstract: We provide evidence to determine whether conservative financial reporting is associated with firm‐level investments in innovation in China. We find that firms adopting a more conservative reporting policy invest substantially more in innovative projects. We also find that conservative reporting practices improve the association between executives' pay‐for‐performance and a firm's innovation efforts. The association between conservatism and firm‐level innovation is concentrated in firms that are in the non‐high‐tech industries, that have higher financial leverage and more product market competition. Our paper adds to public policy by providing evidence of the beneficial influence of accounting conservatism on higher innovation investment.

Source: Accounting and Finance

DOI: 10.1111/acfi.13357

Authors: Min Bai, Pamela Kent, Sujin Kim, Shan Li

Institutions: University of Science and Technology Beijing, Queensland University of Technology, The University of Adelaide, Xiamen University

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W4403825909