Accounting Conservatism in Stock Price Downfall Risk in "Tehran Stock Exchange"

Abstract

As the economic departments' managers tend to report good news, they simultaneously try to conceal bad news. Conservatism procedures not only resist against these tendencies of management, but also they decrease the investment risk in stock. In this research, the relationship between accounting conservatism and the risk related to downfall of stock value has been studied using historical data about 29 car and pieces companies accepted in Tehran Stock Exchange during the years 2010- 2012. The results obtained from performing the logistic regression model show that there is a negative and significant relationship between the risk of stock value decline and the level of conservatism for case-study statistic sample companies. In other words, during the research period, those companies in which the more conservative procedures have been applied in financial reporting, they have less encountered the risk of stock value decline. In the present research, company size was involved as a controlling variable in hypothesis test pattern that a significant relationship wasn't observed between this variable and the research's dependent variable.

Keywords

• accounting conservatism
• risk
• the risk of stock value downfall
• company size
• accounting procedures