Accounting conservatism and money laundering risk

Meysam Bolgorian and Ali Mayeli

Accounting Research Journal, 2020, vol. 33, issue 2, 343-361

Abstract: Purpose - This paper aims to investigate the relationship between accounting conservatism and money laundering risk. For this goal, the authors construct an index for measuring money laundering risk at the firm level for Iranian listed firms in the Tehran Stock Exchange. Design/methodology/approach - In this study, the authors use a sample of 924 firm-year observation of Iranian listed firms for the period of 2012-2017. The authors use three approaches for testing our prediction that more conservative firms are less likely to be involved in money laundering activities. A balanced panel regression model has been used for testing the prediction. Findings - The paper results suggest that there is a negative relationship between conditional conservatism and money laundering risk. Furthermore, the authors have shown that the result is robust to controlling for different firm characteristics variables and also industry specific effects. Research limitations/implications - Further research in other financial markets is needed to confirm the results generally. Practical implications - The evidence in this paper indicates that the degree of accounting conservatism contains important information which can be used by the investors and regulators for managing and controlling the risk of money laundering in the firms. Originality/value - By constructing a money laundering risk measure at the firm level for the first time, the authors provide evidence on relationship between conservatism and money laundering risk in Iran.

Keywords: Risk; Money laundering; Accounting conservatism (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:arj-12-2018-0221

DOI: 10.1108/ARJ-12-2018-0221

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