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Asian Journal of Research in Business Economics and Management
Year : 2018, Volume : 8, Issue : 5
First page : ( 71) Last page : ( 86)
Online ISSN : 2249-7307.
Article DOI : 10.5958/2249-7307.2018.00048.8

Reviewing Effect of Information Asymmetry and Cost Stickiness on Conditional Conservatism Accounting in Firms Listed in Tehran Stock Exchange

Momenia Alireza*, Gholamib Amin**

*Assistant Professor of Payam Noor University, Tehran, Iran

**PhD student of accounting, Islamic Azad University, Chabahar, Ira

Online published on 31 May, 2018.

Abstract

Conditional conservatism is a degree of greater certainty for identifying good news as a profit from bad news as a loss. This asymmetry can also be attributed to another phenomenon called cost stickiness. Also, good and bad news can result from information asymmetry. If both phenomena of information asymmetry and cost stickiness exist, lack of cost stickiness in estimation of conservatism will result in estimation more than its real value. According to the results of this study, we have observed the conservatism by information asymmetry as a result of conservatism, using stock return criterion (Basu criterion), although the likelihood of asymmetry of profit as a result of cost stickiness is evident. This study evaluates information asymmetry and cost stickiness on conditional conservatism accounting (good and bad news through impact on accounting returns) in Tehran Stock Exchange for a period of 8 years (2010–2016). The assumption of conditional conservatism in Tehran Stock Exchange is confirmed; indicating that profit response (loss) to news and bad signals (negative returns) is stronger than its response to news and favorable signals (positive returns). Also, according to the results of this study, cost stickiness has an inverse and significant relationship with conservatism, but there is no relationship between conditional conservatism and information asymmetry.

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Keywords

Conditional conservatism, Cost stickiness, Information asymmetry 1. Introduction.

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