While prior research holds the consensus that accounting conservatism can serve as an effective monitoring device, it is not clear whether shareholders can successfully enforce managers’ adherence to accounting conservatism when directors fail to fulfill their fiduciary duties. We attempt to answer the question by exploiting staggered enactments of the universal demand (UD) laws in 23 US states. UD laws raise procedural hurdles for shareholders to file derivative lawsuits against managers and directors who allegedly breach their fiduciary duties. For firms incorporated in states that adopt UD laws, restrictions on shareholder litigation rights weaken directors’ incentives to monitor managers. We predict and find a decrease in conditional conservatism following the enactment of UD laws. The decline in conditional conservatism exists only for firms with low institutional ownership, low external equity dependence, or high ex-ante derivative lawsuit risk. The main result is attributable to both the direct channel (through restriction of shareholder litigation rights) and the indirect channel (through the deployment of management-friendly governance provisions). Our findings suggest that shareholders cannot successfully demand accounting conservatism when directors lack the incentives to monitor managers.

中文翻译：

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普遍需求规律与会计稳健性的监控需求

虽然先前的研究一致认为会计稳健性可以作为一种有效的监督手段，但当董事未能履行其受托义务时，股东是否能够成功地促使经理人遵守会计稳健性尚不清楚。我们试图通过利用美国 23 个州交错颁布的通用需求 (UD) 法来回答这个问题。UD 法律为股东对涉嫌违反受信义务的经理和董事提起衍生诉讼提出了程序障碍。对于在采用 UD 法律的州注册的公司，对股东诉讼权利的限制削弱了董事监督经理的动机。我们预测并发现在 UD 法律颁布后条件保守主义会减少。事前衍生诉讼风险。主要结果归因于直接渠道（通过限制股东诉讼权利）和间接渠道（通过部署有利于管理的治理条款）。我们的研究结果表明，当董事缺乏监督经理的动机时，股东无法成功要求会计稳健性。