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The effect of corporate reputation on accounting conservatism

Author

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  • Amirkhani, Kourosh
  • Brown, Jenny
  • Gramlich, Jeffrey

Abstract

This study examines the impact of corporate reputation on accounting conservatism. We argue that firms with valuable reputations are likely to select conservative accounting practices as a form of insurance to protect their reputations. We document strong evidence that companies with high reputations—those included on Fortune's “Most Admired Companies” list—employ more conservative accounting than firms not on the list. We also investigate a hand-collected sample of firms with product recalls. Accounting conservatism appears to offset the negative stock price effect of product recalls, and high-reputation firms appear to benefit substantially more from conservative accounting than control firms.

Suggested Citation

  • Amirkhani, Kourosh & Brown, Jenny & Gramlich, Jeffrey, 2024. "The effect of corporate reputation on accounting conservatism," Advances in accounting, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:advacc:v:67:y:2024:i:c:s0882611024000038
    DOI: 10.1016/j.adiac.2024.100732
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    More about this item

    Keywords

    Accounting conservatism; Corporate reputation; product recalls;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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