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

Khalil, Mohamed; Ozkan, Aydin; Yildiz, Yilmaz


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Dr Mohamed Khalil
Lecturer in Accounting and Finance and Programme Director for BSc Accounting and Financial Management

Aydin Ozkan

Yilmaz Yildiz


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.

Journal Article Type Article
Journal Review of Quantitative Finance and Accounting
Print ISSN 0924-865X
Electronic ISSN 1573-7179
Publisher Springer Verlag
Peer Reviewed Peer Reviewed
APA6 Citation Khalil, M., Ozkan, A., & Yildiz, Y. (in press). Foreign institutional ownership and demand for accounting conservatism: evidence from an emerging market. Review of Quantitative Finance and Accounting,
Keywords Accounting conservatism; Foreign ownership; Institutional investors; Emerging market
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Additional Information First Online: 10 September 2019


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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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