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Conference Paper: The Risk Management Role of Accounting Conservatism for Operating Cash Flows

TitleThe Risk Management Role of Accounting Conservatism for Operating Cash Flows
Authors
KeywordsAccounting conservatism
Risk management
Downside risk
Operating cash flows
Hedging
Issue Date2012
Citation
University of Western Australia Accounting and Finance Research Forum, Perth, Australia, June 2012 How to Cite?
AbstractThis study examines whether unconditional and conditional accounting conservatism (UC and CC) serve risk management roles with respect to the downside properties of operating cash flows (OCF), and channels by which they operate. Our results reveal both UC and CC to be negatively associated with OCF downside risk measured by indicators of OCF falling below its expectations, OCF relative lower partial moments and OCF at risk. Tests of operative channels indicate that (1) UC and CC relate positively to cash holdings that reduce OCF downside risk and that (2) UC (CC) substitutes for (complements) corporate hedging in helping mitigate OCF downside risk. Further tests indicate that downside cash flow beta enhances the mitigating effects of UC and CC on OCF downside risk. These findings are robust to alternative measures and controls and lend support to accounting conservatism playing a risk management role with respect to OCF downside risk.
Persistent Identifierhttp://hdl.handle.net/10722/152528

 

DC FieldValueLanguage
dc.contributor.authorBiddle, GC-
dc.contributor.authorMa, ML-
dc.contributor.authorSong, FM-
dc.date.accessioned2012-07-09T06:44:01Z-
dc.date.available2012-07-09T06:44:01Z-
dc.date.issued2012-
dc.identifier.citationUniversity of Western Australia Accounting and Finance Research Forum, Perth, Australia, June 2012-
dc.identifier.urihttp://hdl.handle.net/10722/152528-
dc.description.abstractThis study examines whether unconditional and conditional accounting conservatism (UC and CC) serve risk management roles with respect to the downside properties of operating cash flows (OCF), and channels by which they operate. Our results reveal both UC and CC to be negatively associated with OCF downside risk measured by indicators of OCF falling below its expectations, OCF relative lower partial moments and OCF at risk. Tests of operative channels indicate that (1) UC and CC relate positively to cash holdings that reduce OCF downside risk and that (2) UC (CC) substitutes for (complements) corporate hedging in helping mitigate OCF downside risk. Further tests indicate that downside cash flow beta enhances the mitigating effects of UC and CC on OCF downside risk. These findings are robust to alternative measures and controls and lend support to accounting conservatism playing a risk management role with respect to OCF downside risk.-
dc.languageeng-
dc.relation.ispartofUniversity of Western Australia Accounting and Finance Research Forum-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectAccounting conservatism-
dc.subjectRisk management-
dc.subjectDownside risk-
dc.subjectOperating cash flows-
dc.subjectHedging-
dc.titleThe Risk Management Role of Accounting Conservatism for Operating Cash Flowsen_US
dc.typeConference_Paperen_US
dc.identifier.emailBiddle, GC: biddle@hkucc.hku.hk-
dc.identifier.emailSong, FM: fmsong@econ.hku.hk-
dc.description.naturepostprint-
dc.identifier.spage1-
dc.identifier.epage50-
dc.publisher.placePerth, Australia-

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