Accounting conservatism and corporate cash levels: Empirical evidence from Latin America
研究了会计稳健性如何影响拉丁美洲企业的现金持有水平，发现稳健性越强，企业现金持有越多，因为减少了现金被滥用的代理问题。
Abstract Research Question/Issues The aim of this research is to shed light on the role accounting conservatism plays in the determination of firms' cash levels. Previous literature suggests that conservatism is a governance mechanism that can alleviate agency problems associated with managers' investment decisions. Hence, we hypothesize that strong conservatism limits managers' ability to expend cash to benefit themselves. For that, we used an unbalanced panel data of firms from Latin America (Argentina, Brazil, Chile, Mexico, and Peru) with data available from 2000 to 2018. Research Findings/Insights Our results are, for the most part, consistent with our theoretical predictions. Indeed, we find strong and robust evidence that Latin American firms with more conservative accounting policies have higher cash holdings as a result of a reduction in cash misappropriation. These results are robust to alternative measures of conservatism, after controlling for other factors associated with timely loss recognition, for country fixed effects and after a battery of robustness checks. Theoretical/Academic Implications Our analyses suggest that increased conservatism has the potential to bring real economic benefits to organizations, serving as an efficient mechanism that reduces agency costs regarding cash management by inducing a more efficient use of cash holdings. Therefore, we contribute to the international literature on conservatism, cash holdings, and corporate governance by demonstrating the importance of conservatism in firms' decisions on how cash is employed. These findings are particularly interesting because cash expropriation can have a devastating impact on shareholder wealth. Practitioner/Policy Implications Given the ongoing debate about whether neutrality, as opposed to conservatism, is a desirable feature in financial reports, by documenting how conservatism reduces agency problems related to cash management, we also provide practical implications for accounting standard‐setters.