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Financial Constraint and Conditional Conservatism
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재무적 제약과 조건적 보수주의

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Type
Academic journal
Author
sangkwon CHA (한양대학교)
Journal
아시아.유럽미래학회 유라시아연구 유라시아연구 제18권 제2호 KCI Accredited Journals
Published
2021.1
Pages
159 - 183 (25page)

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Financial Constraint and Conditional Conservatism
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This study examines the relationship between financial constraints and conditional conservatism. Previous studies pointed out that the greater the financial constraints, the greater the involvement of managers in financial reporting, and tax avoidance to create cash flows within the firm is performed, which can intensify information asymmetry. It was pointed out that the greater the financial constraints, the greater the plunge in share prices, which can occur due to the fact that managers do not timely include bad news about the company in their financial statements for additional financing. Therefore, in order to verify this, this study noted that it is currently omitted despite the proactive analysis of the timeliness of low bad news in financial constraint companies, which is the most important cause in research on financial constraints and capital markets. An empirical analysis was conducted on the KOSPI market and the KOSDAQ market from 2007 to 2020. As a result of the analysis, it was confirmed that financial constraints and conditional conservatism had a negative relationship. In other words, it was reported that the greater the financial constraints, the lower the timeliness of losses. Second, the negative relationship between financial constraints and conditional conservatism was observed more clearly as the size of auditors large and in the KOSDAQ market, and this result was confirmed to be observed the same in both accruals-cash flow models and market-based models. This study expanded the preceding research as a study that pointed out that accounting policies in companies with large financial constraints can also reduce the level of conservative accounting, a method of improving the financial foundation and efficiency of contracts.

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