Investigating the Effect of Information on Conservatism in Financial Statements of Accepted Companies in the Tehran Stocks' Exchange

Information asymmetry is a negative event that gives manager incentives to use his private information to attempt transferring wealth from investors by overstating financial performance and consequently, stock prices during his tenure at the firm. The manipulations generate agency costs. Conservative reporting is a mechanism that reduces the managers’ ability to manipulate and overstate financial performance and increase the firm’s cash flows and value. So the main purpose of this study is to investigate the level of information asymmetry between investors and its effect on accounting conservatism in the companies listed in the Tehran stock exchange. Conservatism is measured using the Givoly & Hyan model, and the information asymmetry measurement is the PIN score (the probability of an information-based trade). Through doing this research the information related to samples of companies of the stock exchange between 1386-1387 considered. The statistical approach applied in the present research is a correlation analysis with linear regression and also variance analysis test using SPSS software. The result shows that information asymmetry and changes in information asymmetry are positively related to accounting conservatism.