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Impact of Conservatism on the Accounting Information Quality and Decision Making of the Shareholders and the Firms Listed on the Tehran Stock Exchange

Author

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  • Mohammad Hamed Khan Mohammadi

    (Islamic Azad University)

  • Forough Heyrani

    (Islamic Azad University)

  • Nezam Golestani

    (Islamic Azad University)

Abstract

This study mainly aims at investigating the impact of conservatism on the quality of the accounting information and decisions of the shareholders and the Tehran listed firms. To achieve this goal, the impact of conservatism on the three characteristics of relevancy, reliability and timeliness of the accounting information has been explored. The main objective of the study has been defined and examined in terms of one hypothesis along with the other subsidiary objectives. The present paper is an applied study using cross-sectional correlations. The required data is obtained from the whole firms listed on the Tehran Stock Exchange for six years covering the years from 2006 to 2011. The samples are selected by a filtering technique and finally 300 firms are chosen. The data and hypotheses are analyzed by using simple linear regression. The findings reveal that there is a relationship between conservatism and information quality. It is also documented that conservatism positively influences on each characteristic of relevancy, reliability and timeliness. Therefore, the market might become more efficient after requiring the timely reporting and providing transparent and complete financial statements. It contributes the investors and participants of the stock exchanges make appropriate decisions.

Suggested Citation

  • Mohammad Hamed Khan Mohammadi & Forough Heyrani & Nezam Golestani, 2013. "Impact of Conservatism on the Accounting Information Quality and Decision Making of the Shareholders and the Firms Listed on the Tehran Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(3), pages 186-197, July.
    • Handle: RePEc:hur:ijaraf:v:3:y:2013:i:3:p:186-197
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    References listed on IDEAS

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    1. Kousenidis, Dimitrios V. & Ladas, Anestis C. & Negakis, Christos I., 2009. "Value relevance of conservative and non-conservative accounting information," The International Journal of Accounting, Elsevier, vol. 44(3), pages 219-238, September.
    2. Basu, Sudipta, 1997. "The conservatism principle and the asymmetric timeliness of earnings," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 3-37, December.
    3. Givoly, Dan & Hayn, Carla, 2000. "The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative?," Journal of Accounting and Economics, Elsevier, vol. 29(3), pages 287-320, June.
    4. Zhang, Jieying, 2008. "The contracting benefits of accounting conservatism to lenders and borrowers," Journal of Accounting and Economics, Elsevier, vol. 45(1), pages 27-54, March.
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    Cited by:

    1. Hesham Abdelghany, 2015. "The effect of accounting disclosure quality and information asymmetry on the stock market activity ? an applied study on listed companies in the Egyptian stock market," Proceedings of International Academic Conferences 2704127, International Institute of Social and Economic Sciences.
    2. Ajla Muratovic-Dedic & Nino Serdarevic, 2017. "Financial Reporting Quality and Debt Contracting in Emerging Economy," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(4), pages 71-82, October.

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