ADC. Suma de Negocios · 2024

Agency costs and conditional conservatism of public companies in the Brazilian electric industry

In organisations, conflicts of interest give rise to agency costs aimed at mitigating agent opportunism. High-quality accounting information reduces these conflicts by minimising information asymmetry. Consequently, this study aims to investigate the relationship between agency costs and conditional conservatism in Brazilian electric power industry companies listed on the B3. Data from 21 Brazilian electric power industry companies for the period 2012 to 2020 were utilised. Twenty-four attributes associated with agency costs were analysed, and Ball and Shivakumar’s (2005) conditional conservatism model was employed as a measure of accounting information quality. Panel data regression models were used to obtain the results. According to the central conditional conservatism model, companies tend to exhibit optimism rather than conservatism, anticipating gains instead of losses. Results, assessed across five dimensions, revealed that factors such as board composition, varia ble compensation, and agreements with shareholders reduce optimism, while qualified audits, longer tenures, and the presence of a permanent audit committee increase opti mism. Therefore, attributes that influence optimism, accounting information neutrality, and consequently, financial reporting quality, are identified.