Reviewing Accounting Conservatism and Earnings Value Relevance Across the Business Cycle in Tehran Stock Exchange

According to accounting literature, value relevance of earnings is caused by the relationship between earnings and return. Had the earning response related to negative returns exceeds positive ones, it can be concluded that management has in fact revealed the bad news via conservative methods; this influences the relationship between earnings and return, which increases the amount of value relevance of earnings. Researches show that disclosing policies (the relationship between earnings and return) of business firms are sensitive to business cycles, thus it can be argued that if the business cycle faced contraction or expansion, the reaction of earnings against negative returns would differ comparing to positive returns. The aim of this research is to assess accounting conservatism and value relevance of earnings in business cycles. The samples of this study are ۱۰۰ companies listed in TSE; their information for the period of ۲۰۰۷ to ۲۰۱۶ were tested. The results from regression test demonstrate that accounting conservatism and value relevance of earnings is much higher in contractionary economic cycles comparing to any other economic cycles. This result is pursuant to Jenkins et al (۲۰۰۹) research

Keywords:

Accounting conservatism , value relevance of earnings , business cycles