Investigation of the Relationship Between Conservatismand Financial Flexibility in Profitable Firms

The purpose of financial statements is to provide useful information about the financial position, financial performance and financial flexibility. In financial reporting, conservatism is considered as one of the main characteristics of reliability of the information. Thus, we examine the impact of conservatism on financial flexibility of 126 profitable firms listed in the Tehran Stock Exchange during 2010-2016. These companies were selected through screening method. The research method of the present study is applied one in terms of the purpose and future- oriented   in terms of collecting data. Research type is descriptive-correlation. In this research, regression analysis and panel data were used to test the hypotheses. The findings of this study indicate that there is a positive relationship between the conservatism of profitable companies and financial flexibility, including the sensitivity of cash flows changes to open cash flows and the sensitivity of cash flows, investment, and payment decisions about dividend payment to shareholders.