The Role of optimal cash levels and managerial conservatism

Articles in Press

Document Type : Original Article

Authors

EBRAHIM Navidi Abbaspour

Hossein Savabi Jadidi

Heydar Mohammadzadeh Salteh

Akbar Kanani

Accounting department, Faculty of Literature and Humanities, Islamic Azad University, Marand, IRAN

10.22067/ijaaf.2026.97684.1627

Abstract

Optimal cash holdings and their impact on accounting conservatism were the foci of the current investigation. A fundamental principle of financial reporting, accounting conservatism constrains managers' optimism and allows better earnings forecasts for investors and creditors to be made. This study aimed to evaluate the effect of the optimal level of cash holdings on accounting conservatism based on the model developed by Givoly and Hayn (2000). However, the optimal level of cash holdings was assessed using the model proposed by Savabi et al. (2025), in 2014-2023 for firms listed on the Tehran Stock Exchange. From the perspective of research objectives, the study was applied in nature. The findings of the study indicated that accounting conservatism was inversely associated with cash holdings. Therefore, managerial conservatism decreased as cash holdings increased. In contrast, among the determinants explaining the optimal level of cash holdings, industry characteristics, risk measures, performance characteristics, and financial constraints exhibited a direct relationship with accounting conservatism. An inverse relationship was found between accounting conservatism and financial reporting quality measures and market-related variables.

Keywords

Accounting conservatism

optimal cash holdings level

cash holdings

Subjects

• Accounting

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