The Mediating Effect of Financial Leverage on the Relation between Accounting Conservatism and Investment Opportunities

This study with the aim to determine factors influencing the investment opportunities, investigates the effects of financial leverage on the relation between accounting conservatism and investment opportunities in firms listed in Tehran Stock Exchange from 2007 to 2013. The results show a significant positive effect of accounting conservatism on financial leverage as well as a significant negative effect of financial leverage on investment opportunities. To examine the mediating effect of financial leverage on the relation between accounting conservatism and investment opportunities, the multiple regression method (Baron and Kenny) is used. The results show a significant partial mediating effect of financial leverage on the relationship between accounting conservatism and investment opportunities of firms listed in Tehran Stock Exchange. In other words, about 24% of the effect of accounting conservatism on investment opportunities is due to the financial leverage (indirect effect) and about 76% through its effect (direct effect).