The study of effects of accounting conservatism on the flexibility of the financial decisions

Journal Title: International Research Journal of Applied and Basic Sciences - Year 2013, Vol 4, Issue 1


Today, by increasingly rapid changes in the internal and external factors affecting organizations, the increased flexibility of them toward such changes is imperative. In today's competitive world, flexibility is a key factor for the survival of organization and a tool to dominate competitors. Therefore, this study attempts to examine the relation between accounting conservatism and flexibility in financial decisions, such as liquidity, decisions on stock or debt issuance and the sensitivity of investment cash flows. Therefore some hypotheses were tested during the period 2001 to 2010. The statistical sample consisted of 100 companies operating in different parts of Tehran Stock Exchange which are selected considering five limitations and by a screening method. The test procedure which was analyzed using Eviews software is correlation analysis, and the relationship between dependent and independent variable is estimated using panel data. The results indicate that at time interval of the study and at confidence interval of 95% in the manufacturing companies at Tehran Stock Exchange Market, conservative accounting has a direct and significant relationship with liquidity management, and a significant and inverse relationship with the sensitivity of investment cash flows. In addition, there is not any significant relationship between conservative accounting, decisions on the distribution of cash dividends and decision to issue shares and using debt.

Authors and Affiliations

Koroush Ghavi| Department of Accounting, the Sciences and Research Branch, Islamic Azad University, Tehran, Iran,[email protected], Yousef Najafi| Department of Management, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran, Aziz Arfai| Department of Management, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran


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  • EP ID EP5284
  • DOI -
  • Views 245
  • Downloads 14

How To Cite

Koroush Ghavi, Yousef Najafi, Aziz Arfai (2013). The study of effects of accounting conservatism on the flexibility of the financial decisions. International Research Journal of Applied and Basic Sciences, 4(1), 131-138.