Analyzing the relationship between financial leverage and conditional and unconditional conservatism with emphasis on structural equations

Conservatism is an important feature of high quality reporting and most companies use it to achieve the quality of their reports. The quality of accounting information usually indicates that the information was produced in accordance with generally accepted principles of international accounting or auditing standards. Accounting conservatism enhances impartiality between contract parties and is essential as an efficient mechanism in mutual contracts. Conservative financial statements increase the reliability of accounting information. In this study, the effect of financing (financial leverage) on conservatism (as a measure of information quality) was examined using data from 138 companies listed on the Tehran Stock Exchange in the period 1390 to 1397. The independent variable in this study is short-term and long-term financing as well as the total amount of company financing and the dependent variable of conditional and unconditional conservatism. The results showed that there is a significant relationship between financial leverage and accounting conservatism.