Accounting and Auditing Review

Accounting and Auditing Review

The Mediating Role of the Cash Conversion Cycle on the Relationship between Accounting Conservatism Policy and Investment Decisions

Document Type : Research Paper

Authors
Abdolrasoul Rahmanian Koushkaki 1
Sobhan Zare 2
1 Assistant Prof., Department of Accounting, Payame Noor University, Tehran, Iran.
2 MSc., Department of Accounting, Payame Noor University, Tehran, Iran.
10.22059/acctgrev.2026.405535.1009184
Abstract
Objective
The significance of the cash conversion cycle lies in its ability to demonstrate the transmission of accounting conservatism to cash flows, which subsequently impacts the fundamental basis of managerial investment decision-making. This mediating role improves the accuracy of liquidity assessments and increases transparency in the application of conservative policies. Ultimately, this framework helps elucidate the intricate link between accounting conservatism and investment decision-making. The present study aims to investigate the mediating role of the cash conversion cycle on the relationship between accounting conservatism and investment decisions. Accounting conservatism is known as a solution for increasing the quality of financial information and improving investor supervision, which can help reduce the risks of investment decisions. Given the complexities of the market and the increasing asymmetry of financial information, it is necessary to identify how these variables interact to improve investment efficiency. The research gap in this area stems from the lack of comprehensive and up-to-date studies that closely examine the mediating role of the cash conversion cycle in the interaction between conservatism policy and investment decisions.

Methods
This study follows an applied research objective, utilizing a descriptive-causal methodology. The research design is historical (ex-post), with data collection conducted via library and archival research. Data analysis was performed using EViews 12. The statistical population comprised companies listed on the Tehran Stock Exchange (TSE), selected due to the reliability of their audited financial statements and the public accessibility of these records via the Kodal database. Applying these criteria, a final sample of 142 companies was selected for the period spanning 2014 to 2023.
Results
Testing the research hypotheses at a 95% confidence level indicates a direct, significant relationship between accounting conservatism and investment decisions, and an inverse, significant relationship between the cash conversion cycle and investment decisions. Additionally, there is an inverse, significant relationship between accounting conservatism and the cash conversion cycle. However, the cash conversion cycle does not mediate the relationship between accounting conservatism and investment decisions.
Conclusion
By revealing the interactions between accounting conservatism and liquidity management, this study provides the necessary context for improving the quality of strategic decision-making by managers and investors, highlighting the need to adopt evidence-based approaches in financial policymaking. Considering the central role of information quality in optimizing resource allocation, policymakers and company owners should improve the efficiency of investment decisions by establishing reporting systems based on conditional conservatism. Applying this approach-through the timely identification of losses and caution in recording intangible gains-prevents phenomena such as overinvestment in projects that lack technical and economic justification.
Keywords
Cash conversion cycle
Accounting conservatism
Investment decisions
Subjects
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Accounting and Auditing Review
Volume 33, Issue 3
2026
Pages 522-547