| Summary: | 碩士 === 國立中興大學 === 會計學研究所 === 106 === This paper considers accounting conservatism as a proxy for the quality of accounting information and investigates the relationship between accounting conservatism and idiosyncratic risk. We use two methods to measure accounting conservatism. First one is C-Score which is developed by Khan and Watts (2009). Second one is extensions of standard conservatism models to control for the confounding effect of sticky costs, which refer to Banker, Basu, Byzalov, and Chen (2016). We also investigate the moderating role of managerial ability and power on the relationships between accounting conservatism and idiosyncratic risk.
We find that accounting conservatism is positively related to idiosyncratic risk, suggesting that firms with higher accounting conservatism and higher information transparency have higher idiosyncratic risk. We also find that both managerial ability and power would reduce the relationship between accounting conservatism and idiosyncratic risk. Furthermore, able and powerful managers are not only more knowledgeable of their firm resources and operation, but also with greater decision-making authority. The result indicates that managers who have stronger ability and power are associated with weaker relationships between accounting conservatism and idiosyncratic risk.
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