Relationship-Specific Investment and Accounting Conservatism: Effect of Customers and Suppliers
37 Pages Posted: 12 Sep 2008
Date Written: September 12, 2008
We propose that relationship-specific investment induces accounting conservatism and find that at both industry and firm levels a firm's accounting conservatism is positively associated with relationship-specific investment of its customers/suppliers. Further, this association is weaker when vertical integration or extended relationship exists between the firm and its customers/suppliers. These results are qualitatively invariant to alteration of proxies for relationship-specific investment, conservatism or control for endogeneity.
Keywords: Relationship-specific Investment, Accounting Conservatism, Customers/Suppliers
JEL Classification: M41, M44, L23
Suggested Citation: Suggested Citation