The relationship between managerial entrenchment and accounting conservatism
Journal of Facilities Management
ISSN: 1472-5967
Article publication date: 26 February 2021
Issue publication date: 18 November 2021
Abstract
Purpose
This study aims to assess the relationship between managerial entrenchment and accounting conservatism in Iran.
Design/methodology/approach
To test hypotheses, all listed companies on the Tehran Stock Exchange during 2013–2018 (six years) that qualified were selected. Given the defined limitations of the study, a total of 120 firms with 720 year-observations was selected. After collecting data and figures, they were analyzed using EViews software. Having presented the inferential model tests, the panel data with fixed effects model is chosen.
Findings
The study results indicate a positive and significant relationship between managerial entrenchment and unconditional conservatism presented in the income statement. Moreover, the authors find a meaningful relationship between managerial entrenchment and unconditional conservatism about the balance sheet.
Practical implications
Managers will be more aware of the positive consequences of employment optimal corporate governance such as conservative accounting. Such corporate governance is likely to serve their interest in the long run by providing positive signals to the equity owners and board of directors.
Originality/value
By assessing conservatism’s literature in Iran, we observe many studies on this concept. Still, no investigation is carried out on the relationship between conservatism in accounting and managerial entrenchment. The present study is innovative because it evaluates the relationship between managerial entrenchment and two types of conservatism, namely, balance sheet and income statement conservatism, which have never been investigated by prior studies, notably in emerging markets.
Keywords
Citation
Salehi, M., Ghanbari, E. and Orfizadeh, S. (2021), "The relationship between managerial entrenchment and accounting conservatism", Journal of Facilities Management, Vol. 19 No. 5, pp. 612-631. https://doi.org/10.1108/JFM-11-2020-0087
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited