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The Association between Accounting Conservatism and Cash Holding, Dividends and Leverage

Author

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  • Rawan Atwa
  • Ruba Bsoul
  • Buthiena Kharabsheh
  • Mohammad Azzam

Abstract

This paper examines the effect of accounting conservatism on several financial decisions in Jordan. In particular, it aims to expose the effect of accounting conservatism on cash holdings, dividends distributions, and leverage for a sample of 83 Jordanian industrial and service firms listed on the Amman Stock Exchange (ASE) for the period 2015-2019. The feasible generalised least squares (FGLS) regression technique is used to test the association between accounting conservatism and financial decisions. The findings of this paper reveal a negative and significant relationship between accounting conservatism and cash holding. However, positive but insignificant relationships are reported between accounting conservatism and both dividends distributions and leverage. These findings have important implications for investors, corporate managers, and policymakers. The study recommends that future research use different measures of leverage, such as debt-to-equity ratio and long-term debt to equity ratio, in order to compare the results of different measuring instruments. It also recommends incorporating other measures of conservatism, such as market to book ratio and timeliness asymmetric measure.

Suggested Citation

  • Rawan Atwa & Ruba Bsoul & Buthiena Kharabsheh & Mohammad Azzam, 2022. "The Association between Accounting Conservatism and Cash Holding, Dividends and Leverage," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 11, July.
    • Handle: RePEc:bjz:ajisjr:2270
    DOI: https://doi.org/10.36941/ajis-2022-0109
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    References listed on IDEAS

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