The Effect of Accounting Conservatism on the Volume of Financing

Document Type : Research Paper

Authors

1 Associate Professor of Accounting, Al-Zahra University

2 Ph.D. Student of Accounting, Al-Zahra University, Coach of Payame Noor University, Center of the Mountains

Abstract

Accounting Conservatism is one of the criteria to measure earnings quality. When the earnings are high quality, creditors funds to the company in simpler form. Because they are confident to the return of the amount granted to companies. This research investigates the relationship between conditional and unconditional conservatism accounting with the volume of financing of the 134 firms listed on Tehran Stock Exchange during 2005 to 2013. Also, this research compares the intensity of conditional and unconditional conservatism in financing. To measure the conditional conservatism, we apply the criterion introduced by Khan and Watts (2009); and to measure the unconditional conservatism, the criterion presented by Beaver and Ryan (2000) is applied. The research results show that, increasing the degree of conditional and unconditional conservatism, lead to increase in volume of firms’ financing. On the other hand, banks and financial institutes are more willing to grant loans to firms that apply a higher degree of conservatism. 

Keywords

References

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History

  • Receive Date: 14 June 2018
  • Accept Date: 14 June 2018

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