Review of Quantitative Finance and Accounting

, Volume 46, Issue 2, pp 359–385 | Cite as

Institutional ownership composition and accounting conservatism

Original Research


This study empirically investigates the association between institutional ownership composition and accounting conservatism. Transient (dedicated) institutional investors, holding diversified (concentrated) portfolios with high (low) portfolio turnover, focus on portfolio firms’ short-term (long-term) perspectives and trade heavily (generally do not trade) on current earnings news. Thus, I predict that as transient (dedicated) institutional ownership increases, firms will exhibit a lower (higher) degree of accounting conservatism. Consistent with my predictions, in the context of asymmetric timeliness of earnings, I document that as the level of transient (dedicated) institutional ownership increases, earnings become less (more) asymmetrically timely in recognizing bad news.


Institutional investors Accounting conservatism Corporate governance 

JEL Classification




This paper is based on my dissertation at Boston University. I thank my dissertation chairman, Professor Krishnagopal Menon, for his continuous guidance in the development of this paper. I also thank other members of my dissertation committee—Professor Kumar Sivakumar and Professor Jacob Oded—as well as Professor Brian Bushee for providing access to the institutional investor classifications used throughout this study.


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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Department of Accounting and FinanceUniversity of Massachusetts DartmouthNorth DartmouthUSA

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