Accounting and various aspects of finance
Mehdi Heidari; Alireza Aliakbarlou; Ebrahim Khakpour Heydaranlou
Abstract
Conservatism is an action that is used in conditions of uncertainty and limiting management optimistic behaviors to increase the reliability of financial statements. Financial distress and growth opportunities are among the factors that can improve the level of accounting conservatism. Meanwhile, managers' ...
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Conservatism is an action that is used in conditions of uncertainty and limiting management optimistic behaviors to increase the reliability of financial statements. Financial distress and growth opportunities are among the factors that can improve the level of accounting conservatism. Meanwhile, managers' behavioral characteristics are expected to influence the relationship between financial distress and growth opportunities with accounting conservatism. Therefore, the aim of this study was to investigate the effect of management uncertainty on the relationship between financial distress, growth opportunities and accounting conservatism. The results of this study show, the variables of financial distress and growth opportunities have a positive and significant effect on conservatism. Management overconfidence has no significant effect on the relationship between financial distress and conservatism but it moderates the relationship between growth opportunities and conservatism and has a negative and significant effect on the relationship between them. In other words, that managers with unfavorable financial situation do not have a positive outlook on the future situation of the company and increase the level of conservatism. Managers of large and growing companies also tend to opt for more conservative accounting practices to minimize their political and social costs. On the other hand, overconfident managers are optimistic about the future state of the company and reduce the level of accounting conservatism.
Saeid Yadegari; Seyed Abbas Hashemi; Hadi Amiri
Abstract
One of the main reasons for the accruals anomaly is the lower persistence of accrual component of earnings to its cash component. Conservatism, as an accounting convention, increases the reliability of accruals, therefore, it is predicted that conservatism increases accrual persistence. In this study, ...
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One of the main reasons for the accruals anomaly is the lower persistence of accrual component of earnings to its cash component. Conservatism, as an accounting convention, increases the reliability of accruals, therefore, it is predicted that conservatism increases accrual persistence. In this study, the effects of different degrees of accounting conservatism on the persistence of accrual component of earnings were investigated. Consequently, the role of accounting conservatism in the correction of the accruals anomaly was also evaluated which so far, no study has been conducted on this issue in Iran. Therefore, two hypotheses were developed which were statistically examined through multivariable regression models using combined data. Accordingly, using systematic removal method, 105 companies accepted in Tehran Stock Exchange during a 10 year period from 2007 to 2016 were selected as the statistical sample. It was found that accruals level showed a negative influence on the firm returns indicating the presence of accruals anomaly. Additionally, the results revealed that higher degrees of conservatism increased the persistence of accruals and as a result contributed to the correction process of accruals anomaly. The obtained results are consistent with the theoretical foundations of this research.
Mohammad Hossein Safarzadeh; Ahmad Saghafi Pour1F
Abstract
AbstractThis research investigates the impact of accounting conservatism on the stock market’s valuation of nonrecurring gains and losses. The sample is comprised of 126 publicly traded firms listed in Tehran Stock Exchange (TSE) during 1386-1392. The nonrecurring gains and losses, also known as ...
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AbstractThis research investigates the impact of accounting conservatism on the stock market’s valuation of nonrecurring gains and losses. The sample is comprised of 126 publicly traded firms listed in Tehran Stock Exchange (TSE) during 1386-1392. The nonrecurring gains and losses, also known as special items, have asymmetric market valuation multiples, which are proxied by the earnings response coefficient (ERC) in this research. The results show that: (1). an asymmetry exists in the valuation of nonrecurring gains and losses; and (2) the asymmetry can be explained by the idea of accounting conservatism, which is the tendency that firms report economic losses on a timelier basis than economic gains. The above findings show that nonrecurring losses have a higher earnings response coefficient than nonrecurring gains, due to the fact that nonrecurring losses (non-operational losses) are impounded in earnings much quicker than the gains (non-operational gains). Furthermore, as the level of conservatism increases within a firm, this asymmetry of market valuation becomes larger, signifying that the information content of negative nonrecurring items increases at a rate greater than that of positive nonrecurring items
Abstract
This research investigates the impact of accounting conservatism on the stock market’s valuation of nonrecurring gains and losses. The sample is comprised of 126 publicly traded firms listed in Tehran Stock Exchange (TSE) during 1386-1392. The nonrecurring gains and losses, also known as special ...
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This research investigates the impact of accounting conservatism on the stock market’s valuation of nonrecurring gains and losses. The sample is comprised of 126 publicly traded firms listed in Tehran Stock Exchange (TSE) during 1386-1392. The nonrecurring gains and losses, also known as special items, have asymmetric market valuation multiples, which are proxied by the earnings response coefficient (ERC) in this reseach. The results show that: (1). an asymmetry exists in the valuation of nonrecurring gains and losses; and (2) the asymmetry can be explained by the idea of accounting conservatism, which is the tendency that firms report economic losses on a timelier basis than economic gains. The above findings show that nonrecurring losses are have a higher earnings response coefficient than nonrecurring gains, due to the fact that nonrecurring losses (non-operational losses) are impounded in earnings much quicker than the gains (non-operational gains). Furthermore, as the level of conservatism increases within a firm, this asymmetry of market valuation becomes larger, signifying that the information content of negative nonrecurring items increases at a rate greater than that of positive nonrecurring items.
Gholamreza Kordestani; Saeed Gholami roocheh
Volume 10, Issue 39 , October 2013, , Pages 29-56
Abstract
The purpose of this research is the consideration of the relation between suppliers' and customers' bargaining power and accounting conservatism. In this research it is expressed that in order to protect their interest, the suppliers and customers try to appreciate Firms to increase conservatism in financial ...
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The purpose of this research is the consideration of the relation between suppliers' and customers' bargaining power and accounting conservatism. In this research it is expressed that in order to protect their interest, the suppliers and customers try to appreciate Firms to increase conservatism in financial reporting. Instead, the Firms try to withstand to demand of suppliers and customers for accounting conservatism, because of inappropriate image of company shown by conservatism. If the company has more power of bargaining than suppliers and customers, then it will have less sensitivity against suppliers' and customers' demand of accounting conservatism. Otherwise the company has to use more conservatism policies in its financial reporting. Empirical analysis uses data from the 1826 Firms-year during the period 1381 to 1390 indicate that there are significant positive relationship between the bargaining power of suppliers and customers with accounting conservatism. Also, the results revealed, the company's dependence on raw materials and the quality of after-sale services durable goods producers to reduce the bargaining power of the company and increase the conservatives in the aftermath of the financial reporting will have; In addition, the company's industrial activities that have high barriers to entry, the bargaining power of firms increases and decreases the level of conservatism of financial reporting. Overall, the results indicated that the company's suppliers and customers who have higher bargaining power, Companies have the ability to dictate the terms of trade, and in this situation, conservative accounting firms to demand from them will be more sensitive.
Yahya Yeghaneh; Morteza Ahmadi
Volume 10, Issue 38 , July 2013, , Pages 29-52
Abstract
Strong corporate governance structure results in better monitoring of management, timely accounting information, and increasing speed of bad news recognition in order to inform the board and taking needed action (Garcia et al, 2005). On the other hand, conservatism creates a system that prevents the ...
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Strong corporate governance structure results in better monitoring of management, timely accounting information, and increasing speed of bad news recognition in order to inform the board and taking needed action (Garcia et al, 2005). On the other hand, conservatism creates a system that prevents the managers and executives overpayment and prevents any excessive optimism (Watts, 2003). If conservatism really play a role in handling agency problems, the conflicting interests of managers and owners will increase the demand for increased conservatism. Thus, firms with better corporate governance structure, would show a higher degree of conservatism (Garcia et al, 2005). This means that there will be more expected return sensitivity to bad news compared to good news among firms with strong corporate governance structure (Basu, 1997).In this study information of 179 companies in Tehran Stock Exchange within two years 2009 and 2010, using the multiple regression analysis and cross-sectional data, mechanisms of communication between the stock's biggest shareholder, being the parent company, stock concentration, the presence of the CEO in the board, state ownership, the average stock owned by members of the board, the percentage of free float shares of the company, the presence of outside financial expert on the board of directors, the percentage of outside directors, and the auditors, the certain corporate governance mechanisms playing an important role in this regard has been studied with accounting conservatism.The results reveal that except the quality disclosure ratings and stock concentration variables, there is a significant relationship between the mechanisms of corporate governance and accounting conservatism. Corporate Governance, Accounting conservatism, Board of Director, Stakeholders
