Dr. XIE Yuying, SabrinaSabrinaDr. XIE Yuying2024-03-132024-03-132018Xie,Yuying (2018. May 31). Independent directors and the opportunistic use of accounting conservatism in tunneling firms. EAA 2018, Bocconi University.http://hdl.handle.net/20.500.11861/9016http://eaa2018.eaacongress.org/r/abstractsThis study makes use of a sample of Hong Kong listed firms selling assets or equity to their controlling shareholders (asset/equity tunneling) to investigate the effect of independent directors’ monitoring on the accounting conservatism reported before the tunneling. Accounting conservatism is viewed as an efficient financial reporting mechanism that improves contracting efficiency. Prior research shows a positive association between the ratio of outside directors and accounting conservatism, which support that accounting conservatism is a mechanism to monitor managers and reduce agency costs of firms. However, this study shows evidence that, in the tunneling setting, the positive association between independent directors’ monitoring and reported conservatism may come from controlling shareholders’ incentives to conceal the tunneling from the attention of independent directors. In addition, this study shows that independent directors are able to detect the opportunistic use of conditional conservatism, whereas they do not detect the opportunistic use of unconditional conservatism.enConference Paper