Author(s): Sandra Alves
The existing literature suggests that conservatism is related to ownership structure. For a sample of non-financial listed Portuguese and Spanish firms-year from 2005 to 2017, we examine the association between accounting conservatism and corporate ownership structure (measured with three variables: managerial ownership (low, medium and high levels), ownership concentration and institutional ownership), in an agency setting characterized by the presence of large controlling shareholders. The Portuguese and Spanish governance structures are characterized by the presence of controlling shareholders who normally are able to significantly influence or even control the corporate decisions. Using the Fixed Effects Regression Model, to Portugal and Spain, we find a positive effect at low (up to 5 per cent stockholdings) and high (more than 25 per cent stockholdings) levels of managerial ownership on conservatism. The study’s results also suggest that ownership concentration demand for more conservatism. Unlike Spain, in Portugal there is no evidence that institutional ownership affects positively the levels of accounting conservatism.