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Does accounting quality mitigate risk shifting?

Author(s)
Loktionov, Yuri V
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Other Contributors
Sloan School of Management.
Advisor
S.P. Kothari and Joseph P. Weber.
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M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission. http://dspace.mit.edu/handle/1721.1/7582
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Abstract
This study examines the effect of financial reporting quality on risk shifting, an investment distortion that is caused by shareholders' incentives to engage in high-risk projects that are detrimental to debt holders. I use asymmetric timeliness to proxy for a dimension of accounting quality that is particularly useful to debt holders. Asymmetric timeliness is expected to improve debt holders' ability to effectively monitor the management's actions and to discipline the managers when necessary. I predict that the effect of accounting quality on risk shifting will be stronger in firms with poor information environment, in distressed firms, in cash-rich firm, and after the adoption of the Sarbanes-Oxley Act of 2002. I also expect this effect to vary based on the firm's source of debt. The results are consistent with the predictions and robust to alternative measures of risk shifting, accounting quality, distress risk, and various control variables.
Description
Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2009.
 
Cataloged from PDF version of thesis.
 
Includes bibliographical references (p. 56-62).
 
Date issued
2009
URI
http://hdl.handle.net/1721.1/58377
Department
Sloan School of Management
Publisher
Massachusetts Institute of Technology
Keywords
Sloan School of Management.

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