Operational and Performance Research in Accounting and Auditing

Operational and Performance Research in Accounting and Auditing

The Impact of Accounting Conservatism on Debts Combination and the Company’s Growth with Emphasis on the Corporate Governance

Document Type : Original Article

Authors
1 Faculty of Management and Economic, Islamic Azad University, Science and Research Branch,Tehran, Iran
2 Accounting, Faculty of Management and Economic, Islamic Azad University, Science and Research Branch,Tehran, Iran
Abstract
Financing through debts requires increasing reliability of financial statements and reducing information asymmetry. Conservatism through quick identification of costs and prevention of identification of unrealized incomes improve the trust of financers, which facilitates access to foreign financial sources for a company. Therefore, this research aims at determining the impact of accounting conservatism on debts combination and the company’s growth with emphasis on corporate governance. It used the financial information of 101 companies listed in Tehran Stock Exchange during 2011 and 2017. The results using multivariate regression model and panel data method show that conservatism has a positive and significant impact on debt combination and financing increases through long-term debts with the conservatism increasing. In addition, conservatism has a positive and significant effect on company growth through internal financing and maximum growth of company through short-term financial resources. Examining research hypotheses in the two groups of the companies with strong and weak corporate governance revealed that conservatism has a positive and significant effect on debts combination, company growth through internal financial resources, and maximum growth through short-term financial resources only if there is a strong corporate governance structure.
Keywords