The effect of Conditional and Unconditional conservatism on earning quality using Basu, Ball, R & Shivakumar models

Document Type : Original Article

Authors
Hoseyn Badiei 1
Mohammad Mahmoudi 2
Roohollah Rezazadeh 3
1 Ph.D. Student of Accounting, Allameh Tabatabaei University
2 Assistant professor , Islamic Azad University, Firoozkooh Branch
3 Islamic Azad University, Shahre-Rey Branch
Abstract
the purpose of this paper is to examine the impact of conditional and unconditional conservatism on earning` quality in Tehran stock exchange market.we used a sample of 65 firms during the period of 1381 to 1390.this paper follows the asymmetric timeliness of earnings measure of Basu(1997)and the asymmetric cash flow to accruals measure of Ball and Shivakumar`s(2005) with further extension to examine the effects of conditional and unconditional conservatism on earning`s quality. These two models are able to measure conditional conservatism and we have extended these models by inserting the market to book ratio(MTB) as a proxy of unconditional conservatism and cash flow from operation to net income ratio(CFO/NI)as a proxy of earning`s quality.theResults from data analysis showed that the conditional and unconditional conservatism has no significant relation with earnings quality in basu`s measure while conditional and unconditional conservatismin ball and shivakumar`s model has negativeeffects on earning`s quality.this difference in our results could be due to the different natural of two models. Therefore recommended to use the other models to achieve thedecisive results.
Keywords
conditional and Unconditional conservatism
Basumodel
Ball
R&Shivakumarmodels