Conditional conservatism in financial reporting

Document Type : Research Paper

Authors

1 Associate Prof., Faculty of Social Sciences, International Imam Khomeini University, Qazvin, Iran

2 Ph.D. Candidate in Accounting, Faculty of Management and Economics University of Tarbiat Modares, Tehran, Iran

3 MSc. Student in Accounting, Faculty of Social Sciences, International Imam Khomeini University, Qazvin, Iran

Abstract

Conditional conservatism is stated as sentiment of accountants in order to have more verifiability for recognizing favourable news versus unfavourable news. This article has investigated the existence of conditional conservatism in Tehran stock exchange firms’ reported earnings by using Ball, Kothari and Valeri (2013) model. This model explores the existence of asymmetric earnings response by using financial variables such as size, book-to-market ratio, leverage, stock return volatility, unexpected earnings and abnormal returns. Result of implementing pool data regression on 1140 firm-year observations from 2005 to 2012 indicated lack of asymmetric earnings timeliness and according to Ball, Kothari and Valeri (2013) model. There is no conditional conservatism in financial reporting of Tehran stock market firms.

Keywords

References

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Accounting and Auditing Review
Volume 21, Issue 4 - Serial Number 4
January 2015
Pages 471-484

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