Investigation on the role of conservative accounting in the reduction of company bankruptcy risk (evidence from Iranian capital market, based on Zawgin bankruptcy Model)

Subject Areas : Management Accounting

زهره  حاجیها ¹ (ندارد)
مهدی  قائم مقامی ² (ندارد)

Received: 2011-06-10 Accepted : 2011-12-16 Published : 2012-09-10

Keywords: conservative accounting, conditional and non conditiona, Bankruptcy Risk, Zavgin prediction Model,

Abstract :

This research examines the existing relations between conservative accounting andbankruptcy risk, that conservative accounting causes increasing properties and cashand bankruptcy is as a condition in which there is not enough money or cash, soaccounting theory indicates the existence of this relation between these two issues. Inthis research we used from classifications of the conditional and non conditionalconservatism and Zavgin bankruptcy prediction Model. Which just shows a spectrumof probability of bankruptcy instead of just expressing two cases?To investigate the relationship we used regression model. Based on financial dataof companies listed in Tehran Stock Exchange during the period of 2000 to 2009 (772year/ firm of observation), the research results indicate there is significant relationshipbetween conservatism and bankruptcy risk. In other words, the operations of firmsinclude conservative accounting to reduce bankruptcy risk. The finding is consistentwith other research and it could help both insiders and outsiders to decision making.