Abstract:
Information asymmetry is a negative event that gives manager incentives to use his private information to attempt transferring wealth from investors by overstating financial performance and consequently, stock prices during his tenure at the firm. The manipulations generate agency costs. Conservative reporting is a mechanism that reduces the managers’ ability to manipulate and overstate financial performance and increase the firm’s cash flows and value. So the main purpose of this study is to investigate the level of information asymmetry between investors and its effect on accounting conservatism in the companies listed in the Tehran stock exchange. Conservatism is measured using the Givoly & Hyan model, and the information asymmetry measurement is the PIN score (the probability of an information-based trade). Through doing this research the information related to samples of companies of the stock exchange between 1386-1387 considered. The statistical approach applied in the present research is a correlation analysis with linear regression and also variance analysis test using SPSS software.
The result shows that information asymmetry and changes in information asymmetry are positively related to accounting conservatism.
Machine summary:
"Investigating the Effect of Information on Conservatism in Financial Statements of Accepted Companies in the Tehran Stocks' Exchange Receipt: Januar y 3 , 2011 Acceptance: March 30 , 2011 Roya Darabi Assistant Professor of Accounting of Islamic Azad University, South Branch.
So themain purpose of this study is to investigate the level of informationasymmetry between investors and its effect on accounting conservatism in the companies listed in the Tehran stock exchange.
Conservative financial reporting is a governance mechanism that reduces the managers’ ability to manipulate and overstate financial performance and increase the firm’s cash flows and value (Lafond and Watts, 2008), and it can also solve a lot of problems related to agency costs and information asymmetry.
The results indicate that the negative relation between disclosure quality and information asymmetry is primarily caused by reducing the like hood that investors discover and trade on private information.
004 7- conclusion and Discussion In this study, we investigate the relation between information asymmetry and conservatism in the financial statement of the companies listed in Tehran stock exchange.
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