systematic risk and conditional conservatism

this paper examines the effect of systematic risk on accounting conservatism. the idea is that in firms with higher systematic risk, managers have higher incentives to delay the recognition of bad news in the hope of future good news. they also face less demand for conservatism from investors and auditors. in this paper, for measuring systematic risk and accounting conservatism, we used beta from capm model and ball and shivakumar (2006) model, respectively. consistent with these arguments, we find a significant and negative association between systematic risk and accounting conservatism using 681 observations (75 firms) from 1380 to 1390. when known determinants of conservatism were controlled, robustness of this association was affirmed. furthermore, examining the bad news and good news samples separately reveals that the effect of systematic risk on conservatism is likely to originate from delaying the recognition of bad news rather than accelerating the recognition of good news.