Accounting Conservatism and the Market Value of Cash Holdings in Brazil

Aviner Augusto Silva Manoel

Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade em Ribeirão Preto, Ribeirão Preto, Brasil

Marcelo Botelho da Costa Moraes

Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade em Ribeirão Preto, Ribeirão Preto, Brasil

Authors: 1. Aviner Augusto Silva Manoel, PhD in Controlling and Accounting, School of Economics, Business, and Accounting in Ribeirão Preto, University of São Paulo, Ribeirão Preto, Brazil.

2. Marcelo Botelho da Costa Moraes, Professor of Financial Accounting at the Department of Accounting, School of Economics, Business, and Accounting in Ribeirão Preto, University of São Paulo, Ribeirão Preto, Brazil.

Authors' contributions:

1^st author: Definition of research problem; Development of hypotheses or research questions (empirical studies); Development of theoretical proposals (theoretical essays); Theoretical framework/Literature review; Definition of methodological procedures; Data collection; Statistical analysis; Analysis and interpretation of data; Critical revision of the manuscript; Manuscript writing. 2^nd author: Definition of research problem; Definition of methodological procedures; Statistical analysis; Analysis and interpretation of data; Critical revision of the manuscript.

Variables	Mean	Median	Standard Deviation	Minimum	Maximum
Cash/Total Assets	0.078	0.054	0.079	0.000	0.374
Cash/Net Assets	0.094	0.057	0.110	0.000	0.597
$V_{i, t}$	0.670	0.411	0.774	0.010	4.223
$E_{i, t}$	0.044	0.058	0.116	-0.604	0.311
$d E_{i, t}$	-0.006	-0.001	0.108	-0.522	0.417
$d E_{i, t + 1}$	0.003	0.000	0.105	-0.359	0.567
$d N a_{i, t}$	0.000	0.000	0.000	0.000	0.000
$d N a_{i, t + 1}$	0.000	0.000	0.000	0.000	0.000
$G r o w t h O p p o r t u n i t i e s_{i, t}$	-0.023	-0.038	0.325	-0.735	1.555
$I_{i, t}$	0.071	0.051	0.072	0.000	0.418
$d I_{i, t}$	-0.001	-0.001	0.047	-0.219	0.183
$d I_{i, t + 1}$	-0.003	-0.001	0.047	-0.220	0.170
$D_{i, t}$	0.020	0.008	0.033	0.000	0.182
$d D_{i, t}$	-0.000	0.000	0.026	-0.114	0.114
$d D_{i, t + 1}$	-0.001	0.000	0.022	-0.101	0.084
$d V_{i, t + 1}$	0.098	0.005	0.539	-1.474	2.551
$d C a s h_{i, t}$	-0.012	-0.002	0.059	-0.256	0.132
$C O N A C C_{i, t}$	-0.854	-0.857	0.191	-1.499	-0.327
$d C a s h_{i, t} * C O N A C C_{i, t}$	0.008	0.002	0.045	-0.119	0.190
$d C a s h_{i, t + 1}$	0.006	-0.000	0.061	-0.153	0.288

	Panel A	Panel B
Variables	Coefficients (Standard Error)	Coefficients (Standard Error)
Constant	0. 552*** (0.066)	0.792*** (0.098)
$E_{i, t}$	0.332 (0.221)	0.417* (0.219)
$d E_{i, t}$	0.140** (0.068)	0.125* (0.068)
$d E_{i, t + 1}$	0.221 (0.139)	0.245* (0.135)
$d N a_{i, t}$	8644.030** (3635.370)	10895.500*** (3565.290)
$d N a_{i, t + 1}$	7755.590*** (2757.540)	6782.750*** (2491.000)
$G r o w t h O p p o r t u n i t i e s_{i, t}$	0.059* (0.033)	0.087*** (0.033)
$I_{i, t}$	-0.489* (0.257)	-0.630** (0.265)
$d I_{i, t}$	0.005 (0.307)	0.103 (0.299)
$d I_{i, t + 1}$	-0.386 (0.267)	-0.414 (0.257)
$D_{i, t}$	5.882*** (1.576)	5.391*** (1.564)
$d D_{i, t}$	-0.655* (0.356)	-0.671* (0.341)
$d D_{i, t + 1}$	2.819*** (1.023)	2.650*** (1.012)
$d V_{i, t + 1}$	-0.261*** (0.058)	-0.264*** (0.059)
$d C a s h_{i, t}$	0.092 (0.140)	0.886*** (0.333)
$C O N A C C_{i, t}$	-	0.274^*** (0.085)
$d C a s h_{i, t} * C O N A C C_{i, t}$	-	1.078^** (0.423)
$d C a s h_{i, t + 1}$	0.518 (0.336)	0.556^* (0.335)
Observations	1,839	1,839
Adjusted R²	0.311	0.321
Durbin-Watson test	0.827	0.802
p-value	0.000	0.000

	Panel A	Panel B
Variables	Coefficients (Standard Error)	Coefficients (Standard Error)
Constant	0.537*** (0.068)	0.767*** (0.103)
$E_{i, t}$	0.303 (0.223)	0.381* (0.221)
$d E_{i, t}$	0.139** (0.067)	0.126* (0.067)
$d E_{i, t + 1}$	0.219 (0.142)	0.242* (0.138)
$d N a_{i, t}$	8861.320** (3800.360)	11034.600*** (3750.460)
$d N a_{i, t + 1}$	7766.690*** (2839.480)	6844.690*** (2580.690)
$G r o w t h O p p o r t u n i t i e s_{i, t}$	0.069* (0.035)	0.095*** (0.035)
$I_{i, t}$	-0.457* (0.258)	-0.599** (0.268)
$d I_{i, t}$	-0.013 (0.311)	0.081 (0.303)
$d I_{i, t + 1}$	-0.391 (0.269)	-0.419 (0.260)
$D_{i, t}$	5.913*** (1.695)	5.443*** (1.682)
$d D_{i, t}$	-0.616* (0.368)	-0.635^* (0.354)
$d D_{i, t + 1}$	2.806** (1.088)	2.640** (1.075)
$d V_{i, t + 1}$	-0.249*** (0.058)	-0.252*** (0.059)
$d C a s h_{i, t}$	0.087 (0.144)	0.869*** (0.334)
$C O N A C C_{i, t}$	-	0.263^*** (0.089)
$d C a s h_{i, t} * C O N A C C_{i, t}$	-	1.067^** (0.429)
$d C a s h_{i, t + 1}$	0.482 (0.344)	0.516 (0.343)
Observations	1,660	1,660
Adjusted R²	0.310	0.319
Durbin-Watson test	0.847	0.822
p-value	0.000	0.000

Variables	Coefficients (Standard Error)
Constant	0.781*** (0.102)
$E_{i, t}$	0.408* (0.215)
$d E_{i, t}$	0.125* (0.065)
$d E_{i, t + 1}$	0.241* (0.135)
$d N a_{i, t}$	10764.400*** (3440.050)
$d N a_{i, t + 1}$	6800.560*** (2492.770)
$G r o w t h O p p o r t u n i t i e s_{i, t}$	0.087*** (0.033)
$I_{i, t}$	-0.636** (0.271)
$d I_{i, t}$	0.106 (0.298)
$d I_{i, t + 1}$	-0.418 (0.257)
$D_{i, t}$	5.453*** (1.572)
$d D_{i, t}$	-0.649* (0.341)
$d D_{i, t + 1}$	2.685*** (1.015)
$d V_{i, t + 1}$	-0.262*** (0.059)
$d C a s h_{i, t}$	0.668^** (0.304)
$C O N A C C_{i, t}$	0.271*** (0.085)
$d C a s h_{i, t} * C O N A C C_{i, t}$	1.250^*** (0.452)
$B I G 4_{i, t}$	0.009 (0.035)
$d C a s h_{i, t} * B I G 4_{i, t}$	0.477 (0.304)
$d C a s h_{i, t + 1}$	0.577^* (0.331)
Observations	1,837
Adjusted R²	0.323
Durbin-Watson test	0.801
p-value	0.000

\begin{matrix} V_{i, t} = α_{i} + β_{1} E_{i, t} + β_{2} d E_{i, t} + β_{3} d E_{i, t + 1} + \\ β_{4} d N a_{i, t} + β_{5} d N a_{i, t + 1} + β_{6} R D_{i, t} + β_{7} d R D_{i, t} + \\ β_{8} d R D_{i, t + 1} + β_{9} I_{i, t} + β_{10} d I_{i, t} + β_{11} d I_{i, t + 1} + \\ β_{12} D_{i, t} + β_{13} d D_{i, t} + β_{14} d D_{i, t + 1} + β_{15} d V_{i, t + 1} + \\ β_{16} d C_{15} h_{i, t} + β_{17} d C a s h_{i, t + 1} + ϵ_{i, t} \end{matrix}

\begin{array}{l} V_{i, t} = α_{i} + β_{1} E_{i, t} + β_{2} d E_{i, t} + β_{3} d E_{i, t + 1} + β_{4} d N a_{i, t} + β_{5} d N a_{i, t + 1} \\ + β_{6} G r o w t h O p p o r t u n i t i e s_{i, t} + β_{7} I_{i, t} + β_{8} d I_{i, t} + β_{9} d I_{i, t + 1} + β_{10} D_{i, t} + β_{11} d D_{i, t} \\ + β_{12} d D_{i, t + 1} + β_{13} d V_{i, t + 1} + β_{14} d C a s h_{i, t} + β_{15} {CONACC}_{i, t} + β_{16} d C a s h_{i, t} \\ * C O N A C C_{i, t} + β_{17} d C a s h_{i, t + 1} + ϵ_{i, t} \end{array}

\begin{matrix} V_{i, t} = α_{i} + β_{1} E_{i, t} + β_{2} d E_{i, t} + β_{3} d E_{i, t + 1} + \\ β_{4} d N a_{i, t} + β_{5} d N a_{i, t + 1} + β_{6} G r o w t h O p p o r t u n i t i e s_{i, t} + \\ β_{7} I_{i, t} + β_{8} d I_{i, t} + β_{9} d I_{i, t + 1} + β_{10} D_{i, t} + β_{11} d D_{i, t} + \\ β_{12} d D_{i, t + 1} + β_{13} d V_{i, t + 1} + β_{14} d {Cash}_{i, t} + \\ β_{15} {CONACC}_{i, t} + β_{16} d {Cash}_{i, t} * {CONACC}_{i, t} + \\ β_{17} {BIG4}_{i, t} + β_{18} d {Cash}_{i, t} * {BIG4}_{i, t} + β_{19} d {Cash}_{i, t + 1} + ϵ_{i, t} \end{matrix}

Brasil