The impact of financial constraints on accounting conservatism

Demonier, Gladyson Brommonschenkel; Almeida, José Elias Feres de; Bortolon, Patrícia Maria

doi:10.7819/rbgn.v17i57.2326

Cited by 3 publications

(7 citation statements)

References 25 publications

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“…Consistent with expectations, thier results also show that the negative relationship between conservatism and firm investments for underinvestment firms is concentrated in firms with high return volatility and firms with short CEO investment horizons. Demonier, Almeida & Bortolon 2015 The results show fiancially constrained fims adopt less conditional conservatism practices on their accounting fiures.…”

Section: Literature Reviewmentioning

confidence: 90%

“…To measure Moderating Variable this study adopted Myers & Majluf (1984): The moderating variable is firm cash holding as proxy of financial constraint, in which it is measured as the ratio of total cash and equivalent items to total assets (Leonida et al, 2006, Khalid et al, 2015and Demonier et al, 2015.…”

Section: Methodsmentioning

confidence: 99%

“…Conservatism is expected to reduces potential underinvestment in the presence of information frictions and ameliorates the negative impact of the financing frictions on corporate investment because of focusing on the financial constraints challenge allows firms to use a conservatism measure immediately prior to the external shock to explain changes in firm investment. In this study, firms cash holdings is used as proxy of financial constraints (as used by Arslan, Florackis & Ozkan, 2006;Leonida, Ozkan & Ozkan, 2006;Honda & Suzuki, 2006;Khalid, Albusaidi &Serkan, 2015 andDemonier, Almeida &Bortolon, 2015).…”

Section: Introductionmentioning

confidence: 99%

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Moderating Effect of Financial Constraint on Relationship Between Accounting Conservatism and Investment Efficiency of Nigerian Consumer Goods Firms

Lawal

Hassan

2021

JAT

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This study explores the moderating effect of financial constraint on relationship between Accounting conservatism and investment efficiency of consumer goods firms listed on the Nigerian Stock Exchange market. The study used correlational and ex-post facto research design in a sample of 27 consumer goods firms. Secondary data for a period of 10 years (2010-2019) was used, and Advanced panel multiple regression was employed in data analysis. The results obtained from this research indicate that there is a significant relationship between accounting conservatism and investment efficiency. The study also found that there is a significant moderation effect between accounting conservatism and financial constraint on defining investment efficiency of consumer goods firms in Nigeria. The study concludes by showing that financial constraint has antagonistic role to accounting conservatism on explaining investment efficiency thus, conservatism may not improve investment efficiency in firms facing financial constraints. The study suggests that consideration of firms financial conditions should form an essential part of any analysis towards understanding the impact of Accounting conservatism more especially on investment behaviour, because of the influence financial constraint has on accounting conservatism is antagonistic in nature

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Section: Literature Reviewmentioning

confidence: 90%

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Moderating Effect of Financial Constraint on Relationship Between Accounting Conservatism and Investment Efficiency of Nigerian Consumer Goods Firms

Lawal

Hassan

2021

JAT

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“…The last factor is that companies that are unable to distribute their income to shareholders are more likely to face financial constraints than companies that can distribute revenue. This research is proxied by the dividend payout ratio (Almeida et al, 2004;Claessens et al, 2006;Rauh, 2006;Linck et al, 2013;Demonier et al, 2015;Dyreng & Markle, 2016;and Kurt, 2017). Claessens et al (2006) stated that companies that have low dividends are said to be experiencing financial constraints because they have little or no income that can be distributed to shareholders (Fazzari et al, 1988).…”

Section: Variable Operationalizationmentioning

confidence: 99%

The Effect of Executive Characteristics and Financial Constraints on Tax Avoidance:

Nabila,

Rachmawati

2023

jabminternational

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This study aimed to examine the effect of executive characteristics and financial constraints on tax avoidance. our proxies for Executive characteristics are a corporate risk, and the proxy for the financial constraint is FINCON value using confirmatory analysis of combines these three measures net debt ratio, interest coverage ratio, and dividend payout ratio. The population of this study is manufacturing companies listed on the Indonesia Stock Exchange on the observation period 2016- 2018. The method used is purposive sampling, with a total of samples obtained were 135 manufacturing companies during 2016-2018. The type of data used is secondary data taken from www.idx.co.id. Data analysis was processed using multiple linear regression. The results showed that executive characteristics had a positive and significant effect on the company’s tax avoidance. Financial constraints have a positive and significant effect on the company’s tax avoidance on manufacturing companies listed on the Indonesia Stock Exchange period 2016-2018.

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“…However, these works aim at dividing the sample into two parts that distinguish with e.g., high or low cash holdings. See Demonier et al (2015) with the analysis of the empirical works following the approach proposed by Fazzari et al (1988) and Kaplan and Zingales (1997). The EMIS database presents industry information, company profiles, reports, and financial data, as well as macroeconomic statistics and forecasts for emerging markets in Asian, Latin American, and Central and Eastern European countries.…”

mentioning

confidence: 99%

Analysis of Bankruptcy Threat for Risk Management Purposes: A Model Approach

Wieczorek-Kosmala

Błach

Trzęsiok

2018

IJFS

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In previous works, the importance of risk management implementation was addressed with regard to the problem of bankruptcy threat, with the explanation of risk impact on higher bankruptcy costs or the underinvestment problem. However, the evaluation of the impact of risk outcomes is technically linked to risk frequency and risk severity as the two dimensions of the risk map. The purpose of our study is to advocate two additional dimensions that incorporate liquidity and/or debt capacity constraint in the aftermath of risk occurrence. In the conceptual dimension, we propose a model that may support the appropriate design of risk management methods, by scaling a company’s ability to self-resist the risk outcomes. The study provides the empirical illustration of the frequency of the distinguished patterns of risk self-resistance. It was found that most frequently companies face the limited ability to self-resist risk outcomes, due to high debt capacity and high liquidity constraints. We also found statistically significant interdependencies between the company’s sector and the risk self-resistance. It supports the conclusion that the level of liquidity and debt capacity constraints and thus the ability to retain risk outcomes is sector-specific. It has important implications for the effective design of risk management methods.

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The impact of financial constraints on accounting conservatism

Cited by 3 publications

References 25 publications

Moderating Effect of Financial Constraint on Relationship Between Accounting Conservatism and Investment Efficiency of Nigerian Consumer Goods Firms

Moderating Effect of Financial Constraint on Relationship Between Accounting Conservatism and Investment Efficiency of Nigerian Consumer Goods Firms

The Effect of Executive Characteristics and Financial Constraints on Tax Avoidance:

Analysis of Bankruptcy Threat for Risk Management Purposes: A Model Approach

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