Does Accounting Conservatism Mitigate the Operating Cash Flows Downside Risk?

Amneh Hamad*, Mohammad AL-Momani and Hamzah Al-Mawali
Additional contact information
Amneh Hamad*: Department of Accounting, School of Business, University of Jordan, Jordan
Mohammad AL-Momani: Department of Accounting, Faculty of Economic and business, Jadara University, Jordan
Hamzah Al-Mawali: Department of Accounting, School of Business, University of Jordan, Jordan

The Journal of Social Sciences Research, 2019, vol. 5, issue 2, 472-483

Abstract: The aim of this study is to investigate whether the two types of accounting conservatism (conditional and unconditional) mitigate the risk of falling operating cash flows in the presence of cash holdings of Jordanian companies for the period from (2005–2014) for a sample of (160) companies listed in Amman Stock Exchange (ASE). By using the principle components analysis method in the SPSS system to generate a composite measure for the measurement of the conditional conservatism (CC_CM) consisting of three measures: negative accruals (CC_NACC), current accruals to total accruals (CC_CACC), and accounting conservatism to the good news (CC_ACGN). As well as to generate another composite measure for the measurement of the unconditional conservatism (UC_CM) consisting of three measures: total accrual (UC_TACC), book to market (UC_BTM) ratio, and skewness (UC_Skew). In order to measure the downside risk of operating cash flows, we used the root lower partial moment of operating cash flow (RLPM_OCF). We find that two types of accounting conservatism are significantly positively effect on cash holdings. In addition, we conclude that there is a significantly negatively indirect effect for accounting conservatism on downside risk of operating cash flows in Jordanian companies that have cash holdings. It means that the increasing of the accounting conservatism leads to the increasing of cash holdings, which leads to mitigate the operating cash flows downside risk.

Keywords: Conditional accounting conservatism; Unconditional accounting conservatism; Root lower partial moment; Operating cash flows downside risk; Cash holdings. (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.arpgweb.com/pdf-files/jssr5(2)472-483.pdf (application/pdf)
https://www.arpgweb.com/journal/7/archive/02-2019/2/5 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arp:tjssrr:2019:p:472-483

Access Statistics for this article

The Journal of Social Sciences Research is currently edited by Dr. Paola Magnano

More articles in The Journal of Social Sciences Research from Academic Research Publishing Group Rahim Yar Khan 64200, Punjab, Pakistan.
Bibliographic data for series maintained by Managing Editor ().