Social capital, as measured by the strength of civic norms and density of social networks in a community, is positively associated with accounting conservatism. We find that social capital surrounding corporate headquarters positively influences corporate reporting culture, and the firms in such areas prefer hiring managers with proven records of accounting conservatism. Consequently, the managerial tendency to hide bad news, use ambiguous reporting language, and write-off assets decreases. This social capital-induced accounting conservatism and corporate reporting culture ultimately improves firms’ information environment: stock liquidity is higher, opaqueness and idiosyncratic volatility are lower, and price delay is smaller.

Social Capital, Corporate Reporting Culture and Accounting Conservatism.

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 AAA 2020 Virtual Annual Meeting and Conference on Teaching and Learning

The American Accounting Association is the largest community of accountants in academia. Founded in 1916, we have a rich and reputable history built on leading-edge research and publications. The diversity of our membership creates a fertile environment for collaboration and innovation. Collectively, we shape the future of accounting through teaching, research and a powerful network, ensuring our position as thought leaders in accounting.