Relationship-Specific Investment and Accounting Conservatism: Effect of Customers and Suppliers

37 Pages Posted: 12 Sep 2008

See all articles by Charles J. P. Chen

Charles J. P. Chen

China Europe International Business School (CEIBS)

Zengquan Li

Shanghai University of Finance and Economics - School of Accountancy

Xijia Su

City University of Hong Kong (CityUHK) - Department of Accountancy

Yiwei Yao

affiliation not provided to SSRN

Date Written: September 12, 2008

Abstract

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

Chen, Charles J. P. and Li, Zengquan and Su, Xijia and Yao, Yiwei, Relationship-Specific Investment and Accounting Conservatism: Effect of Customers and Suppliers (September 12, 2008). Available at SSRN: https://ssrn.com/abstract=1267068 or http://dx.doi.org/10.2139/ssrn.1267068

Charles J. P. Chen

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Zengquan Li

Shanghai University of Finance and Economics - School of Accountancy ( email )

No. 777 Guoding Road, Shanghai
Shanghai, 200433
China

Xijia Su (Contact Author)

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China
+852 2788 7995 (Phone)
+852 2788 7944 (Fax)

Yiwei Yao

affiliation not provided to SSRN ( email )

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