1_ Impact of Corporate Characteristics on the Qualitative Attributes of Accounting Earning

8/11/2019 1_ Impact of Corporate Characteristics on the Qualitative Attributes of Accounting Earning

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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS

COPY RIGHT 2013 Institute of Interdisciplinary Business Research 410

JANUARY 2013VOL 4,NO 9

IMPACT OF CORPORATE CHARACTERISTICS ON THE

QUALITATIVE ATTRIBUTES OF ACCOUNTING EARNINGMAHMOOD MOEINADDIN*

Assistant Professor

Department of Accounting, Yazd Branch, Islamic Azad University, Yazd, Iran.

*Corresponding Author

FATEME SHIRMARDI ROKN ABADI

M.A Student

Department of Accounting, Yazd Branch, Islamic Azad University, Yazd, Iran.

ABSTRACT

One the most fundamental changes in accounting that has been widely considered

by the users of financial data from the past to the present is the accounting earning,while the qualitative attributes of profit including its conservatism and timeliness

have always been a matter of concern among researchers. The current study was

designed and conducted in order to examine the relationship between the qualitativeattributes of profit and the selected characteristics of corporations. The statistical

population of this study includes the entire non-financial companies registered inthe Tehran Stock Exchange and the considered sample consists of 90 corporations

that were selected through systematic deletion and the required data (from 2006 to2010) were compiled and then analyzed using the single-variable and multi-variable

regression method based on panel data.

The results suggest that the conservatism of earnings has a direct relationship with

liquidity while it has a reverse relationship with the length of the cash conversioncycle and the sustainable growth rate of earning. Also, timeliness of earning has areverse relationship with the length of cash conversion cycle while it is directly

relevant to liquidity and the sustainable growth rate of earnings.

Keywords: Profit conservatism, timeliness, qualitative attributes of earning, length

of conversion cycle, sustainable growth rate of earning, liquidity.

INTRODUCTION

Conservatism in accounting has long history. Theoretical concepts of financial

conservatism are considered one of the components of the quality feature of

reliability. Indeed, conservatism could be regarded as an output of obscurity and

whenever accountants face ambiguity, they apply conservatism. Conservatismrepresents a less optimistic estimation. Adoption of reasonably economic decisions

and optimized allocation of restricted and scarce resources to the superior activitieswithout access to in-time, valid and reliable data is impossible (Bassou, 1997)


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Accounting earnings are conservative, in other words earning tend to reflect the bad

news (negative turnover of stocks) based on a timely basis than the good news(positive turnover of stocks). Timeliness of fiscal reports is also another important

feature of accounting data. In other words, investors rely more on the new datawhen making financial decisions since they believe that the outdated data have

already had their impact on the stock prices, thus the latter would not yieldearnings. Therefore, more quick access to accounting data would have a positive

effect on optimized decision-making while it also enhances the possibility ofearnings.

Bassou (1997) defines conservatism as the necessity to acquire a high degree of

approval in order to identify the good news such earning as opposed to the badnews such as loss. This a definition of conservatism based on gain and loss.

Conservatism may be effective in improving the data provided by the management.One of the main advantages that observation of conservatism would have for the

debtors is the reduction in interest rates of the loans they receive (Pae et al, 2005).

Timeliness is also another important feature of quality in financial data. Timelinessmeans the data must become available to the users in the shortest time and via the

most rapid way possible. Timeliness of earning as a qualitative feature is based onthe idea that the accounting earning is a percentage of economic earning

measurement which is defined as alteration in stock market value (Francis, 2003).

Corporate characteristics (liquidity, length of cash conversion cycle and sustainable

growth rate of earning) each affect the qualitative attributes of earning(conservatism and timeliness) in a different manner. Since the qualitative attributes

of earning are demanded by the users and the users themselves seek to gainmaximum earnings and achieve personal benefits, some corporate characteristics

affecting the qualitative attributes of earning would increase the profitability as wellas the user demand for these data, so that it is highly important to identify

inventories, receivable and payable accounts with regards to cash conversion cycle.Identification of the optimized level of inventories, accounts payable and receivable

wherein maintenance and opportunity costs are minimized followed by recurrentcalculation of cash conversion cycle according to these amounts would lead to an

accurate and comprehensive insight into the efficiency of managing cash flows.Moreover, managers may enhance the profitability and operational cash flows of

their firms through reduction of both cash conversion cycle and collection period ofaccounts receivable, thus stimulating timely provision of data (Haitham, 2010).

All corporations are trying to achieve the maximum favorable value in earning and

are seeking solutions to increase earning. The main purpose of company is to


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increase the assets of stockholders. Taking a brief look at the main goals of the

company, we realize that the study of corporate characteristics and they respectiveeffects on accounting earning is of major significance whereby managers may make

an attempt to fulfill their objectives through improvement of favorable value inqualitative attributes of earning. The aforesaid attributes play vital roles in success

or failure of company in future markets and since the combination of timeliness andconservatism represents clarity of earning, then it is a qualitative feature demanded

by users (Bassou, 1997).

Since less research has been devoted to effect of corporate characteristics on thecombination of timeliness and conservatism, this study exerts to examine corporate

characteristics on these two variables.

Background of the study

Bassou et al (2001) studied the relationship between auditing conservatism and the

earnings in quarter intervals during the years 1988-1991 and 1992-1998 in France.Their findings indicated that the legal commitments of auditors caused the earning

in the fourth quarter was more conservative than the previous one and that theimpact of bad news on the fourth quarter earnings was more in-time than the

previous quarter.

Francis et al (2003) studied the effects of the seven qualitative attributes of earning

including the accrual quality, persistence, predictability, smoothness, valuerelevance, timeliness and conservatism on cost of equity capital. Their findingsshowed that firms with the least favorable values of each attribute, considered

individually, generally experience larger costs of equity than firms with the mostfavorable values.

Uday and Waslea (2004) studied the earning conservatism in technology sector of

England and came up with this conclusion that corporations with more progressivetechnologies prefer the more conservative accounting rules for their costs rather

than risking the stockholders.

Wendy et al (2004) took on the study of relationship between accounting quality,earning timeliness, earning conservatism and composition of board members in

corporations during 1999-2003 in U.S. Their findings indicated that corporations

with higher ratios of external board members are more in-time in identification of

bad news effects on earning and that they are not conservative with regards to goodnews.


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Ball & Shivakumar (2005) investigated the earning quality in stock and non-stock

corporations during 1989-1999 in U.S. The found out that the non-stockcorporations have lower quality earnings than the stock ones due to the less demand

for financial reports.

Yuan et al (2006) studied the changing trends of timeliness and conservatism as thetwo attributes of net earning while they also examined the influence of two factors

of corporation size and accounting institute size on these two attributes. They foundout that the net earnings of corporations is generally conservative though it has not

become more timelier and conservative. The two factors of corporation size andaccounting institute size had no effect on the two attributes of net earnings.

Dogan et al (2007) studied the timeliness of financial reporting during 1995-1998.

The findings showed that the timeliness of financial reporting is affected by the

profitability of corporation. And that the corporation size, high financial risk and

schedule related to timely reporting in previous years have been influential intimely financial reporting of corporations.

Haitham (2010) studied the relationship between cash conversion cycle andcorporation profitability in a research conducted during 1990-2004. His findings

showed that: the shorter the length of cash conversion cycle is, the more increasedthe profitability of corporation will be.

Lee et al (2010) studied the role of conservatism in financial decisions made by

corporations during 1996-2007. They found out that if conservatism occurs under

the supervision of capital investors, there would be more tendencies toward increasein capital and that conservative corporations have less flexibility in management oftheir liquidity.

Wendy et al. (2012) studied the relationship between corporate governance and

timeliness during 2003-2008 in Australia. They realized that if data are reflected ina timelier manner, it would lead to more clarity in data and corporate governance

would be improved.

Research Methodology

The methodology applied in current study is applicable in terms of purpose,descriptive in terms of practical strategy and correlative in terms of study of

variables relationships and the researcher attempts to determine the dispersion,distribution and mutual relations among the variables. Single-variable and multi-


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variable regression based on panel data were used to analyze data in this study. This

research covers a period between 2006 and 2010. The data for current study wereextracted from the website of Tehran Stock Exchange as well as Rahavard Novin

software. The analysis and processing of collected data were carried out via Exceland Eviews, while taking into account the type of hypotheses in question, data panel

and statistical tests as well as Chow test were used in order to apply data panel orPulin model simulation, and also the Hausman test was conducted to study the

constant and random effects. Moreover, variance heterogeneity test was applied tostudy the research hypotheses.

Research Hypotheses

- Main Hypothesis

There is a significant relationship between corporate characteristics and quality

attributes of accounting earning.

- Secondary hypotheses

1- There is a significant relationship between sustainable growth rate and corporate

conservatism

2- There is a significant relationship between corporate liquidity and corporate

conservatism

3-

There is a significant relationship between the length of cash conversion cycle

and corporate conservatism

4-

There is a significant relationship between sustainable growth rate and

timeliness

5-

There is a significant relationship between corporate liquidity and timelines

6-

There is a significant relationship between the length of cash conversion cycle

and timeliness

Statistical population and sampling

The statistical population of this research includes all the non-financial corporations

registered in Tehran Stock Exchange from early 2006 until late 2010 (a total of 450corporations.

Statistical sampling was conducted through systematic deletion method and a

number of 90 corporations remained as final samples with respect to all thelimitations applied to the statistical population.


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Statistical samples were selected in accordance to the following four criteria:

1-

The fiscal year-end of corporation is in late February.

2-

No alterations should have been made in the fiscal year of corporation

between 2006 and 2010.

3-

The corporation should have been registered in the Tehran Stock Exchange

prior to 2005 fiscal year-end.

4- The corporations in question still remain a member of Tehran Stock

Exchange until the end of 2010.

Measurement of research variables

The following model was used in this research in order to determine conservatism:

Model (1)

NIit=0+1RDit+2Rit+3RitRDit+it Yuan,D.,Herve,s.(2006)

1. Conservatism of net earnings: The RRD coefficient in regression equation

must be taken into account in order to measure the attribute of

conservatism in net earning with regards to application of conservatism in

corporations. In case the 3coefficient to RRD is significant (P0.5) then it

can be said that conservatism is being applied in corporations.


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Where NIitis:

Market value of stockholders equity is derived as follows:

Market value of stockholders equity= final price of each stock*total number of

corporation stock

Rit: annual turnover of corporation stocks

: Coefficient

RD (virtual variable): The negative turnover index for corporations with negative

turnover is equal to 1, otherwise it would be zero.

If RD is zero (positive turnover i.e. positive reaction of earning to turnover), then the

Bassou model would be as follows:

Nit=0+2Rit (1

If RD is 1 (negative turnover i.e. negative reaction of earning to turnover), then theBassou model would be as follows:

Nit=0+1+ (2+3)Rit (2

Ritcoefficient reflects the reaction of Ritvariable to the dependent variable(earning).

3is the difference between the coefficients of R in first and second scenarios. So,in case 3 is larger than 1, it means that R is larger in the second case. In other

words, if 3 is significant (p0.5) it means that the reaction of earning to negativeturnover is greater i.e. there is conservatism in the corporations.

Ritis the annual turnover of corporate stocks which is derived as follows:


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2.

Timeliness of net earnings: Timeliness is measured using R variable

coefficient from model (1). This model discusses the relationship between

net earnings (homogenized by the variable for market value of

stockholders equity at the end of year t-1) and stocks turnover. If the R

coefficient is significant (P0.5), then timeliness may be attributed to the

corporation.

Model (2)

NIit=0+1Rit+itYuan,D.,Herve,S.(2006)

Nitis calculated similar to Bassous model.

Ritis also calculated the same as Bassous model.

Corporate characteristics

Various criteria are discussed in different financial management literatures regarding the

measurement of corporate characteristics. The characteristics discussed in this research

(i.e. the length of cash conversion cycle, liquidity and sustainable growth rate) are

calculated as follows.

1)

Length of conversion cycle

CCC: cash conversion cycle


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2)Liquidity

LIQ: liquidity

Near cash assets are calculated as follows:

Near cash assets=(total assets*liquidity)-cash

3) Sustainable growth rate of earning

SG=ROE(1-DIV)

SG: sustainable growth rate

ROE: return on equity

DIV: dividend

Testing hypotheses and analysis of f indings

First hypothesis- there is a significant relationship between sustainable growth

rate and conservatism.

The results derived from the regression tables corresponding to this hypothesis

are presented in Table 1.


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Table 1. Results for testing of hypothesis 1-1Corporations with high sustainable growth rateCorporations with low sustainable

growth rate

Estimation period: 2006-2010

NIit=0+ 1RDit+2Rit+3RitRDit+it

Cross-section fixed (dummy variables)

R square0.8140.895

Adjusted R square0.7640.867

F16.4832.235

Probability (Prob)00

Durbin-Watson

statistic1.571.957

Explanatory

variablefactorT statisticprob

Significanc

e levelfactorT statisticprob

Significance

level

R-3.42

-3.710.0003significant.008.0220.98insignificant

RRD-

6.33-2.04.0422

insignifica

nt-33.16-2.4010.01

significant

RD-

5.73-3.91.0001

significant-16.92-2.2550.02

significant

intercept57.435.480significant99.2789.1520significant

Considering the F statistic provided in the tables and their corresponding

probabilities in both corporations with high and low sustainable growth rates, theexamined regression model is significant. Meanwhile, the Durbin-Watson statistic

in both models indicates non-linearity between error terms. Therefore, a linearrelationship exists between dependent and independent variables. The adjusted R

square factors of models are 0.76 and 0.86, respectively. It means that 76% and86% of alterations in net earnings may respectively be predicted in corporations

with high and low sustainable growth rates using the aforesaid model. The RRDcoefficient must be taken into account when studying the conservatism in

corporations. In case this variable is significant, then conservatism is being appliedin corporations. Considering the results presented in table, RRD seems to be

significant in case of corporations with low sustainable growth rates while this

variable is insignificant in case of corporations with high sustainable growth rates.

Corporations with lower sustainable growth rates apply more conservatism,therefore sustainable growth rate has a reverse relationship with conservatism

because increase in sustainable growth rate would lead to mitigation of risk in acorporation and as a result of risk mitigation less conservatism will be applied.


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Second hypothesis- there is a significant relationship between liquidity and conservatism.

The results derived from the regression tables corresponding to this hypothesis

are presented in Tables 2 and 3.

Table 2. Results for testing of hypothesis 1-2Corporations with high liquidityCorporations with low liquidityEstimation period: 2006-2010



R square0.9430.754

Adjusted R square0.9280.689

F62.0911.536


Durbin-Watsonstatistic

1.7681.811

Explanatoryvariable

factorT statisticprobSignificancelevel


R-0.23-0.650.514insignificant-0.52-0.6360.525insignificant

RRD-24.26-2.670.008significant-0.61-2.6420.009significant

RD-20.36-2.420.016significant-8.84-3.4600.0007significant


Table 3. Results for testing of hypothesis 1-2

variableZ statisticprobSignificance level

liquidity26.0330significant

Z0.95=1.65


probabilities in both corporations with high and low liquidities, the examinedregression model is significant. Meanwhile, the Durbin-Watson statistic in both

models indicates non-linearity between error terms. Therefore, a linear relationshipexists between dependent and independent variables. The adjusted R square factors

of models are 0.92 and 0.68, respectively. It means that 92% and 68% of alterations

in net earnings may respectively be predicted in corporations with high and lowliquidities using the aforesaid model. Considering the results presented in table,RRD seems to be significant in case of corporations with both low and high

liquidities. Thus, the Cramers V test is carried out in order to determine the Rsquare difference in the two groups of low and high liquidity corporations. Results

show that this difference is significant. So, the Corporations with higher liquidity

apply more conservatism, therefore liquidity has a direct relationship with


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conservatism because one indication suggesting risk of uncertainty about

consistency of corporate activities is the inability to reimburse the debts.Application of conservatism may be an efficient approach to avoid reduction in

liquidity and retention of consistency in corporate activities.

Third hypothesis- there is a significant relationship between cash conversion cycleand conservatism.

The results derived from the regression tables corresponding to this hypothesis are

presented in Tables 4.

Table 4. Results for testing of hypothesis 1-3Corporations high cash flow cycleCorporations with low cash flow cycle



Cross-section fixed (dummy variables)R square0.7550.921

Adjusted R

square0.6900.900

F11.61744.159


Durbin-Watson

statistic1.8011.725

Explanatory

variablefactorT statisticprobSignificance levelfactorT statisticprobSignificance level

R-1.25-1.5170.13

0insignificant-0.198-0.06950.487insignificant

RRD-4.66-1.5530.122

insignificant-8.204-2.2920.023significant

RD-31.37-3.5500.0005significant-6.573-1.4670.141insignificant



probabilities in both corporations with high and low lengths of cash conversion

cycle, the examined regression model is significant. Meanwhile, the Durbin-Watson

statistic in both models indicates non-linearity between error terms. Therefore, alinear relationship exists between dependent and independent variables. The

adjusted R square factors of models are 0.69 and 0.90, respectively. It means that69% and 90% of alterations in net earnings may respectively be predicted in

corporations with high and low lengths of cash conversion cycle using the aforesaid

model. Considering the results presented in table, RRD seems to be significant in


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case of corporations with low length of cash conversion cycle while this variable is

insignificant in case of corporations with high length of cash conversion cycle.Corporations with lower cash conversion cycle apply more conservatism.

Therefore, cash conversion cycle has a reverse relationship with conservatism.Therefore, more conservatism should be applied in corporations in order to clarify

earnings and avoid abuse by some managers who are seeking higher profits.

Fourth hypothesis- there is a significant relationship between sustainable growthrate and timeliness.



Table 5. Results for testing of hypothesis 1-4Corporations with high sustainable growth rateCorporations with low sustainable growth rate

Estimation period: 2006-2010NIit=0+1Rit+it


R square0.7870.911

Adjusted R

square0.7330.888

F14.70540.735

Probability(Prob)

00

Durbin-Watsonstatistic

1.5221.895

Explanatoryvariable

factorT statisticprobSignificance levelfactorT statisticprobSignificancelevel

R-

4.84-2.559

0.01

1significant-0.292-0.5810.05insignificant



probabilities in both corporations with high and low sustainable growth rates, the

examined regression model is significant. Meanwhile, the Durbin-Watson statistic

in both models indicates non-linearity between error terms. Therefore, a linearrelationship exists between dependent and independent variables. The adjusted R

square factors of models are 0.73 and 0.83, respectively. It means that 73% and83% of alterations in net earnings may respectively be predicted in corporations

with high and low sustainable growth rates using the aforesaid model. The RRDcoefficient must be taken into account when studying the timeliness in corporations.

In case this variable is significant, then timeliness is being applied in corporations.


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Considering the results presented in table, RRD seems to be significant in case of

corporations with high sustainable growth rates while this variable is insignificantin case of corporations with low sustainable growth rates. Corporations with higher

sustainable growth rates apply more timeliness. Therefore, sustainable growth ratehas a direct relationship with timeliness. Having high growth rates, a corporation

may yield a higher financial flexibility for development and the profitabilityincreases. Thus, the corporation should provide timely data to investors and

creditors in order to inform them of utilization of economic resources and resultsfrom business units, facilitating more optimized decision making and increased

profitability.

Fifth hypothesis- there is a significant relationship between liquidity and timeliness.




Considering the F statistic provided in the tables and their correspondingprobabilities in both corporations with high and low liquidities, the examinedregression model is significant. Meanwhile, the Durbin-Watson statistic in both

models indicates non-linearity between error terms. Therefore, a linear relationshipexists between dependent and independent variables. The adjusted R square factors

of models are 0.87 and 0.68, respectively. It means that 92% and 68% of alterations

in net earnings may respectively be predicted in corporations with high and low


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liquidities using the aforesaid model. Considering the results presented in table,

RRD seems to be significant in case of corporations with high liquidities, while thisvariable is insignificant in case of corporations with low liquidity. So, the

Corporations with higher liquidity apply more timeliness, therefore liquidity has adirect relationship with timeliness because the outdated data have already had their

impact on the stock prices, thus they would not yield earnings. Thus, a quickeraccess to accounting information would have a positive effect on decision making

and would increase earnings.

Sixth hypothesis- there is a significant relationship between cash conversion cycleand timeliness.


presented in Tables 7 and 8.

Table 7. Results for testing of hypothesis 1-6Corporations with high cash flow cycleCorporations with low cash flow cycle


NIit=0+1Rit+it


R square0.7370.92

Adjusted R

square0.6720.90

F11.20011.30


Durbin-Watsonstatistic1.7201.68

Explanatoryvariable



R-5.30-2.960.003significant-1.37-3.3970.0008significant



variableZ statisticprobSignificance

level

Cash conversion cycle11.9500significant

Z0.95 =1.65


probabilities in both corporations with high and low lengths of cash conversion


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cycle, the examined regression model is significant. Meanwhile, the Durbin-Watson

statistic in both models indicates non-linearity between error terms. Therefore, alinear relationship exists between dependent and independent variables. The

adjusted R square factors of models are 0.67 and 0.90, respectively. It means that67% and 90% of alterations in net earnings may respectively be predicted in

corporations with high and low lengths of cash conversion cycle using the aforesaidmodel. Considering the results presented in table, RRD seems to be significant in

case of corporations with both low and high length of cash conversion cycle. Thus,the Cramers Z test is carried out in order to determine the R square difference in

the two groups of low and high cash conversion cycle corporations. Results showthat this difference is significant. So, the Corporations with lower cash conversion

cycle apply more timeliness, therefore the length of cash conversion cycle has a

reverse relationship with timeliness because managers tend to prolong the length of

cash conversion cycle and extend the collection of accounts receivable,

consequently reducing profitability and cash flow of corporation. Therefore,decrease in liquidity and profitability reduces the motive necessary for timelyprovision of data.

Discussion and conclusion

The first of secondary hypotheses was tested with regards to impact of sustainable

growth rate on conservatism. The results suggested a reverse significant relationship

between sustainable growth rate and conservatism. And the hypothesis was

approved.

This could probably be due to risk reduction as a consequence increase in

sustainable growth rate and in case the risk is mitigated, less conservatism isapplied in corporations. These results are consistent with those of Lee et al (2001).

In case of secondary hypothesis number two, the relationship between liquidity and

conservatism was discussed and then analyzed. Results showed that there exists adirect significant relationship between liquidity and conservatism. Since one

indication suggesting risk of uncertainty about consistency of corporate activities isthe inability to reimburse the debts, application of conservatism may be an efficient

approach to avoid reduction in liquidity and retention of consistency in corporateactivities.

These results are consistent with those of Lee et al. (2001) but do not comply with

those of Ball et al. (2005).

The third of secondary hypotheses was discussed and tested in order to explain therelationship between the length of cash conversion cycle and conservatism. The


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outcomes suggested a reverse relationship between the length of cash conversion

cycle and conservatism. Therefore, more conservatism should be applied incorporations in order to clarify earnings and avoid abuse by some managers who are

seeking higher profits.

These results are consistent with those of Haitham (2001) but do not comply withthose of Fransic (2005).

The fourth of secondary hypotheses was discussed and tested in order to explain therelationship between the sustainable growth rate and timeliness. The results

suggested a direct significant relationship between sustainable growth rate andtimeliness. It can be said that a corporation having high growth rates may yield a

higher financial flexibility for development and the profitability increases. Thus, the

corporation should provide timely data to investors and creditors in order to inform

them of utilization of economic resources and results from business units,

facilitating more optimized decision making and increased profitability.

These results are consistent with those of Dogan et al. (2007) but do not comply

with those of Rubin et al (2000).

In case of secondary hypothesis number five, the relationship between liquidity andtimeliness was discussed and then analyzed. The results showed a direct

relationship between liquidity and timeliness. So, the Corporations with higher

liquidity apply more timeliness, therefore liquidity has a direct relationship with

timeliness because the outdated data have already had their impact on the stock

prices, thus they would not yield earnings. Thus, a quicker access to accountinginformation would have a positive effect on decision making and would increaseearnings.

This conclusion is consistent with that of Henry (2008) wherein liquidity and

timeliness are considered to be directly related.

The sixth of secondary hypotheses was discussed and tested in order to explain therelationship between the length of cash conversion cycle and timeliness. The results

suggested a reverse significant relationship between the length of cash conversion

cycle and timeliness. It can be said that a corporation having high growth rates mayyield a higher financial flexibility for development and the profitability increases.Thus, the corporation should provide timely data to investors and creditors in order

to inform them of utilization of economic resources and results from business units,facilitating more optimized decision making and increased profitability. This is due

to the fact that managers tend to prolong the length of cash conversion cycle andextend the collection of accounts receivable, consequently reducing profitability


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and cash flow of corporation. Therefore, decrease in liquidity and profitability

reduces the motive necessary for timely provision of data.

This conclusion is consistent with that of Ensee (2000).

Applicable suggestions

1- Since the combination of timeliness and conservatism represents clarity of

earnings and is highly demanded by users as a qualitative attribute, and the

clarity of earning in turn is influential in decision-making of user with

regards to investments and taking into account the results of current study

whereby the effects of three variables of liquidity, sustainable growth rate

and length of cash conversion cycle on conservatism and timeliness were

confirmed, the investors are highly recommended to consider all these

parameters when adopting major economic decision.2- Results derived from analysis of Bassous turnover estimation showed that

the aforesaid model reflects nearly 80 percent of alterations in net earnings

within the capital market of Iran. Therefore, decision makers and investors

are recommended to apply this model for estimation of turnover.

For further studies:

Since there are many factors affecting the qualitative attributes of accounting, it is

suggested to consider and test the impact of other factors such as leverage ratio,debt and profitability on qualitative attributes of accounting.

This conclusion is consistent with that of Henry (2008) wherein liquidity andtimeliness are considered to be directly related.

Limitations of the study

Since the research samples were selected from among corporations registered in

Tehran Stock Exchange and the sampled corporations do not represent the entireactive business units in the country in terms of size, industry and other factors,

therefore generalization of results must be carried out with caution.


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Uday,C.,Charles e,w.,Gregory ,u.(2004)."income conservatism in the u.s

technology sector". SUNY University at Albany, University of Rochester - SimonGraduate School of Business , Emory University - Department of Accounting,

Simon School Working aperNoFR04-01,pp.1-62Yuan,d.,Herve,s.(2006)."Timeliness and conservatism "Accounting and Finance

.vol 5, no.pp.2, 92-107Wendy,B.,Philip,B.&Wevwen,Z.(2012)."The relationship between

disclosure,information timeliness and corporate governance" Accounting andFinance.vol.31,pp.1-48


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1_ Impact of Corporate Characteristics on the Qualitative Attributes of Accounting Earning

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