International Journal of Financial Management

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The Investigation of the Impact of Conditional and Unconditional Conservatism on Agency Cost in Tehran Stock Exchange


Affiliations
1 Department of Accounting, Science and Research Branch, Islamic Azad University, West Azarbyjan, Iran, Islamic Republic of
2 Tabriz Branch, Islamic Azad University, Tabriz, Iran, Islamic Republic of
3 Science and Research Branch, Islamic Azad University, West Azarbyjan, Iran, Islamic Republic of
     

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The aim of this study is to investigate the relationship between conservatism and agency costs in firms listed in Tehran Stock Exchange (TSE). To do so, a sample of 588 firms is selected as research sample for the period of 2004-2010 and fixed effect regression model is used to test hypotheses. C- scoreij index is used to measure unconditional conservatism and Ball and Shivakumar (2005) model to measure conditional conservatism. Multiplying Tobin's Q by free cash flow is considered a proxy for agency cost as independent variable. The results show that conditional conservatism has a negative and significant impact on agency cost while unconditional conservatism has a positive and significant impact.

Keywords

Conditional Conservatism, Unconditional Conservatism, Agency Costs
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  • The Investigation of the Impact of Conditional and Unconditional Conservatism on Agency Cost in Tehran Stock Exchange

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Authors

Saeid Jabbarzadeh Kangarlouei
Department of Accounting, Science and Research Branch, Islamic Azad University, West Azarbyjan, Iran, Islamic Republic of
Nasib Agazadeh Soltan Ahmadi
Tabriz Branch, Islamic Azad University, Tabriz, Iran, Islamic Republic of
Morteza Motavassel
Science and Research Branch, Islamic Azad University, West Azarbyjan, Iran, Islamic Republic of

Abstract


The aim of this study is to investigate the relationship between conservatism and agency costs in firms listed in Tehran Stock Exchange (TSE). To do so, a sample of 588 firms is selected as research sample for the period of 2004-2010 and fixed effect regression model is used to test hypotheses. C- scoreij index is used to measure unconditional conservatism and Ball and Shivakumar (2005) model to measure conditional conservatism. Multiplying Tobin's Q by free cash flow is considered a proxy for agency cost as independent variable. The results show that conditional conservatism has a negative and significant impact on agency cost while unconditional conservatism has a positive and significant impact.

Keywords


Conditional Conservatism, Unconditional Conservatism, Agency Costs

References