Accounting conservatism and the market value of cash holdings in Brazil

Aviner Augusto Silva Manoel, Marcelo Botelho da Costa Moraes

Research output: Contribution to journalArticlepeer-review


Purpose – To analyze the relationship between conservative accounting policies and the value that shareholders attribute to the cash holdings of publicly-traded companies in Brazil. Theoretical framework – Cash holdings are the most vulnerable asset to the agent’s opportunistic actions. Part of the discussion in the literature on the topic concerns the possible mechanisms to align the interests between the agent and principal. However, little is known on whether accounting conservatism, as a governance mechanism and important attribute of financial reports, can mitigate part of the agency problems related to the use of cash holdings. Design/methodology/approach – To analyze the market value of cash holdings we used the Pinkowitz, Stulz, and Williamson (2006) regression model. An accruals-based measure was used as a proxy for accounting conservatism. Findings – The evidence obtained indicates a positive association between conservative accounting policies and the market value of cash holdings. In general, the empirical evidence suggests that shareholders attribute a higher market value to the cash holdings of conservative companies. Practical & social implications of research – Presenting another benefit associated with accounting conservatism also helps in the discussion on conservatism in financial reports. This is relevant given the current debate on the merits of neutrality versus conservatism as a desirable characteristic of accounting numbers. Originality/value – This study contributes to the literature by demonstrating that conservative accounting policies have the potential to provide organizations with real economic benefits, serving as a governance mechanism that reduces the agency problems associated with the use of cash.

Translated title of the contributionConservadorismo contábil e o valor do caixa no Brasil
Original languageEnglish
Pages (from-to)383-399
Number of pages17
JournalRevista Brasileira de Gestão de Negócios
Issue number2
Publication statusPublished - 30 Jun 2022
Externally publishedYes


  • Corporate governance
  • Cash holdings
  • Audit quality


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