Investigating the Effect of Firm Characteristics on Accounting Conservatism and the Effect of Accounting Conservatism on Financial Governance

In today's competitive business world, many companies face the risk of financial distress and bankruptcy. One of the causes of financial distress can be intra-organizational factors such as company characteristics and inadequate level of accounting conservatism. Accordingly, the purpose of this study was to investigate the effect of firm characteristics on accounting conservatism and the effect of accounting conservatism on financial distress in the Tehran Stock Exchange. The statistical population of this study included 137 companies listed in Tehran Stock Exchange during the period of 2011 to 2016 and their data were extracted from Rahavard Novin software. The C-score Index was used to measure accounting conservatism and the Altman adjusted model (localized) was used to measure financial distress. The hypotheses were tested using a multivariate regression method with panel data and fixed effects. The research results showed that in Tehran Stock Exchange, firm characteristics such as company growth and profitability ratio had no negative effects on accounting conservatism. In addition, company life, board composition, and ownership composition had no positive effects on accounting conservatism, and financial leverage had a positive effect on accounting conservatism. Moreover, accounting conservatism had no significant negative effects on financial distress.