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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
NIit=0+ 1RDit+2Rit+3RitRDit+it
Cross-section fixed (dummy variables)
R square0.9430.754
Adjusted R square0.9280.689
F62.0911.536
Probability (Prob)00
Durbin-Watsonstatistic
1.7681.811
Explanatoryvariable
factorT statisticprobSignificancelevel
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
intercept68.5954.960significant94.9541.8180significant
Table 3. Results for testing of hypothesis 1-2
variableZ statisticprobSignificance level
liquidity26.0330significant
Z0.95=1.65
Considering the F statistic provided in the tables and their corresponding
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
Estimation period: 2006-2010
NIit=0+ 1RDit+2Rit+3RitRDit+it
Cross-section fixed (dummy variables)R square0.7550.921
Adjusted R
square0.6900.900
F11.61744.159
Probability (Prob)00
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
intercept35.8914.880significant114.7132.70significant
Considering the F statistic provided in the tables and their corresponding
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.
The results derived from the regression tables corresponding to this hypothesis are
presented in Tables 5.
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
Cross-section fixed (dummy variables)
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
intercept59.9121.6010significant101.4976.7910significant
Considering the F statistic provided in the tables and their corresponding
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.
The results derived from the regression tables corresponding to this hypothesis are
presented in Tables 6.
Table 6. Results for testing of hypothesis 1-5
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.
The results derived from the regression tables corresponding to this hypothesis are
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
Estimation period: 2006-2010
NIit=0+1Rit+it
Cross-section fixed (dummy variables)
R square0.7370.92
Adjusted R
square0.6720.90
F11.20011.30
Probability (Prob)00
Durbin-Watsonstatistic1.7201.68
Explanatoryvariable
factorT statisticprobSignificancelevel
factorT statisticprobSignificancelevel
R-5.30-2.960.003significant-1.37-3.3970.0008significant
intercept48.2515.080significant117.5132.20significant
Table 8. Results for testing of hypothesis 1-6
variableZ statisticprobSignificance
level
Cash conversion cycle11.9500significant
Z0.95 =1.65
Considering the F statistic provided in the tables and their corresponding
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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