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Foreign institutional ownership and demand for accounting conservatism: evidence from an emerging market

Khalil, Mohamed; Ozkan, Aydin; Yildiz, Yilmaz


Aydin Ozkan

Yilmaz Yildiz


© 2019, The Author(s). This study investigates how foreign institutional ownership interacts with accounting conservatism in an emerging market setting. We posit that weak investor protection and a high degree of information asymmetry between insiders and outside investors increase demand for conservative reporting in firms operating in emerging markets. Foreign investors in this setting have informational disadvantages relative to their domestic peers and have difficulties in getting access to data. Using a sample of Turkish firms, we find that foreign institutions (particularly foreign corporate investors) demand more conservative reporting in the investee firms. Moreover, we show that this association is more pronounced among firms with greater asymmetric information problems and growth opportunities. Our additional tests reveal that the direction of causality flows from foreign institutional ownership to conservatism, and not vice versa.


Khalil, M., Ozkan, A., & Yildiz, Y. (2020). Foreign institutional ownership and demand for accounting conservatism: evidence from an emerging market. Review of Quantitative Finance and Accounting, 55(1), 1-27.

Journal Article Type Article
Acceptance Date Jul 31, 2019
Online Publication Date Sep 10, 2019
Publication Date 2020-07
Deposit Date Sep 17, 2019
Publicly Available Date Sep 17, 2019
Journal Review of Quantitative Finance and Accounting
Print ISSN 0924-865X
Electronic ISSN 1573-7179
Publisher Springer Verlag
Peer Reviewed Peer Reviewed
Volume 55
Issue 1
Pages 1-27
Keywords Accounting conservatism; Foreign ownership; Institutional investors; Emerging market
Public URL
Publisher URL
Additional Information First Online: 10 September 2019


Published article (968 Kb)

Copyright Statement
© The Author(s) 2019. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (, which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

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