An Investigation of Conditional and Unconditional Conservatism Effects on Corporate Investment Behavior

The main objective of this paper is to examine the relationship between conditional and unconditional conservatism on investment decisions. Using some models proposed by researchers to measure conservatism and applying regression analysis, 75 companies in Tehran Stock Exchange during the years 2002 to 2010 were studied. Results show that among the firms studied, conditional conservatism had an inverse relationship with investment decisions, but the relationship between unconditional conservatism and investment was direct. Consistent with the findings of foreign research results, results suggest that corporate executives, regardless of the final results of the project, consider the short-term impact of their decisions on the amount of reward and reputation.