The effect of Firm Investment on Future volatility of Stock Returns by Considering the Moderating Effect of Accounting Conservatism

Subject Areas : مدیریت

Mehdi Haghighat shahrestani ¹ , Mohsen Dastgir ² , Afsaneh Soroushyar ³

1 - PhD Student, Department of Accounting, Isfahan Branch (Khorasgan), Islamic Azad University, Isfahan, Iran
2 - Professor, Department of Accounting, Isfahan Branch (Khorasgan), Islamic Azad University, Isfahan, Iran (Correspondent)
3 - Assistant Professor, Department of Accounting, Isfahan Branch (Khorasgan), Islamic Azad University, Isfahan, Iran

Received: 2021-01-12 Accepted : 2021-01-12 Published : 2020-12-21

Keywords: investment, Conditional Conservatism, Unconditional Conservatism, Stock Return Volatility, risk taking,

Abstract :

Risk management is one of the most important tasks of managers. On the one hand, risk-taking leads to increased competitive advantage, and on the other hand, according to the modern portfolio theory, increased risk leads to potential negative fluctuations in return on investment. Once the level of a firm's investments is commensurate with the appropriate level of risk, it can create value for the company. Conditional and unconditional conservatism can each reduce or increase risk because of their characteristics. Therefore, the purpose of the present study is to investigate the impact of firm investment on future stock return volatility considering the moderating effect of conditional and unconditional conservatism. In this regard, the financial information of 129 companies by Using the systematic removal method for the period 2009-2017 was used as combined data. Multivariate regression was used to analyze the data. The findings of the study suggest that conditional conservatism has a negative impact on the firm's future investment. Also, unconditional conservatism has a positive impact on the company's future investment. Other findings suggest that conditional conservatism has a negative impact on the relationship between firm investment and stock return volatility. Finally, unconditional conservatism has a positive effect on the relationship between firm investment and future stock return volatility.