Journal of Iranian Accounting Review

Journal of Iranian Accounting Review

Investigating The Impact of Accounting Conservatism on Residual Income and Abnormal Earnings in Tehran Stock Exchange Listed Companies

Document Type : Original Article

Authors
Pari Chalaki 1
Hamzeh Didar 1
Shahrooz Akbari Cheshmeh 2
1 Assistant Professor of Accounting, Urmia University, Urmia, Iran
2 M.A. in Accounting, Urmia University, Urmia, Iran
10.22055/jiar.2017.19149.1062
Abstract
One of the important factors contained in the financial statements is the
accounting earnings which often financial analysts use on valuation models
and firms performance assessment. On the other hand, since earnings
measure requires estimates, as well as multiple methods of accounting, the
accounting earnings report can be affected by company's conservatism. In
this study, we answered the following question: Does accounting conservatism
have impact on residual income and abnormal earnings? accounting conservatism is
an explanatory variable and residual income and abnormal earnings are the dependent variables.
Dividend, Capital expenditures, Financial Leverage and Firm Size acted as control variables.
Data was gathered between 2003 and 2013. The number of observations was 678. The results
showed that accounting conservatism has a significant negative effect on residual income. Also,
accounting conservatism demonstrated a significant negative impact on abnormal earnings.
Keywords
Abnormal Earnings
Residual Income
accounting conservatism
Journal of Iranian Accounting Review
Volume 4, Issue 14
Spring 2017
Pages 35-58