The Relationship between Accounting Conservatism and Bankruptcy Risk: Evidence from Iran

The main goal of this research is investigating the relationship between accounting conservatism and bankruptcy risk of 166 accepted firms in Tehran stock exchange during 2003-2010. In this research, we use accounting conservatism that is obtained from Givoly and Hayn model as independent variable and firms’ bankruptcy risk that is obtained from Altman model as dependent variable. The results of this research show that there is positive and significant relationship between accounting conservatism and firms’ bankruptcy risk and it indicate that conservative firms have high bankruptcy risk. The results of control variable test represent that small firms and firms with low debt ratio have high bankruptcy risk and also firms with low growth opportunity have low bankruptcy risk.