Accounting Conservatism and Debt

This paper examines the determinants of debt. Using panel data, the study investigates the effect of accounting conservatism on debt. The results of the study indicate that debt is positively correlated with accounting conservatism and negatively with return on asset (ROA). Governmental ownership is a major factor in determining firm debt and has stronger a relationship with debt than with other factors. When the government’s share of firm capital increases, then debt also increases. Firm size has also a down positive relationship with debt. An increase in asset turnover leads to increase debt.