THE IMPACT OF ACCOUNTING CONSERVATISM ON THE COMPANY'S GOING CONCERN AND ITS REFLECTION ON FINANCIAL PERFORMANCE: AN APPLIED STUDY ON A SAMPLE OF IRAQI BANKS LISTED ON THE IRAQ STOCK EXCHANGE
Keywords:
Accounting conservatism, going concern, financial performance, return on assets, return on equity, share priceAbstract
This study aimed to demonstrate the impact of accounting conservatism on the continuity of companies and its reflection on financial performance, specifically within the Iraqi banking sector. The main research problem focused on the extent to which conservative accounting policies contribute to mitigating financial risks, ensuring bank sustainability, and enhancing financial performance indicators amidst local economic fluctuations. The study sample comprised the financial reports of eleven banks listed on the Iraq Stock Exchange. The research period spanned eleven years, from 2014 to 2024, resulting in 121 data observations. The researcher measured accounting conservatism using the unconditional conservatism ratio, which is based on the ratio of market value of equity to book value of equity. A higher ratio indicated a higher level of unconditional accounting conservatism in the banks included in the study sample. The going concern of the banking sector was measured using the Altman Z-score model. Financial performance was assessed using three metrics: return on assets, return on equity, and earnings per share. The SPSS software was used to perform multiple regression analysis, correlation tests, and descriptive statistics (mean and standard deviation). The study found a significant positive (direct) correlation at a significance level of less than 5% between accounting conservatism and both the going concern of the company and its financial performance, measured by its three metrics (return on assets, return on equity, and earnings per share). This indicates that it strengthens going concern indicators and reduces the likelihood of financial distress. Furthermore, accounting conservatism positively impacts the quality of earnings, thereby enhancing the financial performance of the banks in the study sample and boosting investor confidence. The study recommended that Iraqi banks be guided towards maintaining balanced levels of accounting conservatism to protect shareholders' rights and ensure financial sustainability.
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