Analyzing the Moderating Role of Financial Reporting Quality in Iran’s Economic Volatility: Conditional Conservatism in the Face of Oil and Inflationary Shocks
Keywords:
Financial reporting quality, Conditional Conservatism, Economic Volatility, Oil Shocks, Inflationary ShocksAbstract
This study aimed to analyze the moderating role of conditional accounting conservatism in the relationship between oil and inflationary shocks, economic volatility, and the accuracy of gross domestic product forecasting in Iran. This applied study used a descriptive-correlational, causal, and ex post facto design. The statistical population consisted of firms listed on the Tehran Stock Exchange and Iran’s macroeconomic data over the period 1996–2023. After applying the inclusion and exclusion criteria, 125 firms were selected, yielding 3,500 firm-year observations. Conditional conservatism was measured using the Khan and Watts model, economic volatility was calculated as the standard deviation of real GDP growth within a three-year moving window, and forecast accuracy was assessed through the absolute GDP forecast error. Data were analyzed using ordinary least squares regression, interaction-based moderation tests, and diagnostic tests. EViews 13 and Stata 17 were used for the econometric analyses. The results indicated that conditional conservatism had a negative and statistically significant effect on economic volatility (β=-0.214, t=-4.756, p<0.001). Conditional conservatism also had a negative and statistically significant effect on GDP forecast error (β=-0.178, t=-4.944, p<0.001), indicating improved forecast accuracy. Inflation and sanctions had positive and significant effects on both economic volatility and forecast error, whereas oil revenue growth had negative and significant effects on both dependent variables. The first model explained 74.2% of the variance in economic volatility, and the second model explained 68.5% of the variance in GDP forecast error. Conditional accounting conservatism can function as an information-based mechanism that reduces the destabilizing effects of oil and inflationary shocks. Strengthening conditional conservatism in financial reporting may contribute to macroeconomic stability and improve the predictability of GDP in Iran.
Downloads
References
Abdolshah, F., Moshiri, S., & Worthington, A. (2021). Macroeconomic shocks and credit risk stress testing the Iranian banking sector. Journal of Economic Studies, 48(2), 275-295.
Ahmad Ghazban, H., Haghighat, J., Salmani, M., & Asgharpour, H. (2025). Investigating financial stability and the impact of oil cycles in Iran using the NARDL model. Accounting, Finance and Computational Intelligence, 3(3), 1-16.
Asadi, M., Mansourfar, G., Homayoun, S., & Didar, H. (2024). Integrated reporting quality: Value creation and relevance of accounting information. Financial Accounting Knowledge, 11(2), 167-193.
Azari, L., Naji, M., & Salehnia. (2024). Investigating the effect of climate change on gross domestic product growth in Iranian provinces across different time periods. Quarterly Journal of Applied Economic Studies of Iran, 13(52), 9-39.
Behboudi, & Barzegari, D. (2016). An empirical analysis of environmental pressures of gross domestic product in Iran. Geography and Planning, 19(54), 43-60.
Behboudi, D., & Barzegari Dinabad, E. (2016). An empirical analysis of environmental pressures of gross domestic product in Iran.
Biranvand, Malekolsadati, S. S., & Razmi, S. M. J. (2024). Nowcasting Iran's gross domestic product using sentiment analysis of economic news. Applied Theories of Economics, 11(3), 135-164.
Cui, L., Kent, P., Kim, S., & Li, S. (2021). Accounting conservatism and firm performance during the COVID-19 pandemic. Accounting & Finance, 61(4), 5543-5579.
Didar, H., Mansourfar, & Hassanbabaei, M. (2016). Investigating the effect of conditional and unconditional accounting conservatism on financial reporting quality. Accounting Knowledge, 25(7), 145-166.
Esfandiari, M. (2022). The effect of management ability on conditional and unconditional accounting conservatism. Management and Accounting in the Third Millennium, 18(6), 68-83.
Fouladgar, V., & Feyzi. (2023). Estimating Iran's quarterly gross domestic product using nighttime light satellite images. Regional Economics and Development, 29(Autumn and Winter 24), 1-29.
Ghalibaf, A., Nikrosh, Dowlatkami, & Emami. (2015). Conditional accounting conservatism and financial flexibility. Empirical Accounting Research, 5(2), 107-123.
Ghorbani, B., Pourtaher Aghdam, F., & Rahnamay Roodposhti, F. (2022). The effect of auditor conservatism and economic policy uncertainty on earnings quality. Judgment and Decision Making in Accounting Quarterly, 1(2), 1-25.
Hafezi Ghahestani, M., Moghadari Amiri, A., & Mortazavi, A. (2021). Contract adjustment due to economic fluctuations.
Hajiha, Z., & Chenari, H. (2023). The effect of accounting comparability on financial reporting quality with emphasis on audit quality. Judgment and Decision Making in Accounting Quarterly, 2(1), 87-106.
Hejranijamil, M., Hejranijamil, A., & Shekarkhah, J. (2020). Accounting conservatism and uncertainty in business environments: Using financial data of listed companies in the Tehran Stock Exchange. Asian Journal of Accounting Research, 5(2), 179-194.
Kalashi, Hosseini, Seyed, E., & Rajaei. (2016). The effect of government and household sports expenditures on gross domestic product in Iran. Sport Management Studies, 8(38), 165-182.
Kamali Dehkordi, P. (2020). Analysis of the effect of exchange-rate shock, economic sanctions, and oil price on the housing market using the structural vector autoregression model (SVAR). Quarterly Journal of Applied Theories of Economics, 7(4), 27-56.
Kanaani, A., & Asadzadeh, N. (2025). The relationship between readability of financial reports and financial reporting quality with emphasis on the role of information asymmetry. Accounting, Finance and Computational Intelligence, 3(1), 1-18.
Khalid, W. E. O., Faisal, S. M., & Khan, A. K. (2021). Effect of the economic performance of financial statements on raising levels of accounting conservatism. International Journal of Multidisciplinary Research and Growth Evaluation.
Mahmoodi, Abdoli, Shahri, & Dehdar. (2023). Providing a qualitative model of conditional accounting conservatism and financial flexibility to reduce corporate legal claims during COVID-19 using critical appraisal based on multi-grounded theory. Capital Market Analysis, 8(3), 50-78.
Mahmoodi, A. A., Abdoli, M., Shahri, M., & Dehdar, F. (2025). Conditional accounting conservatism and financial flexibility: The Corona pandemic in the formation of legal claims. International Journal of Law and Management, 67(2), 299-324.
Mashayekh, S., & Meymentabadi, S. (2014). Accounting disclosure, accounting quality, conditional and unconditional conservatism. Financial Accounting and Auditing Research, 24(6), 53-70.
Mohammadnezami, S., Hajian, N., & Karimi Jafari, F. (2025). The effect of auditor type on earnings quality considering the moderating role of audit adjustments. Judgment and Decision Making in Accounting Quarterly, 5(18), 1-22.
Mollaee, M., & Mehrabi, M. J. (2015). The relationship between accounting information disclosure quality and conditional and unconditional conservatism. Fiscal and Economic Policies Quarterly, 3(9), 123-158.
Moradi, M., Appolloni, A., Zimon, G., Tarighi, H., & Kamali, M. (2021). Macroeconomic factors and stock price crash risk: Do managers withhold bad news in the crisis-ridden Iran market? Sustainability, 13(7), 3688.
Naeini, M. S. (2023). The Impact of Oil Price Volatility on Banking Stocks: Evidence from Iran Eastern Mediterranean University (EMU) - Doğu Akdeniz Üniversitesi (DAÜ)].
Osoolian, M., Varahrami, V., & Razavi, H. (2024). Financial distress prediction using artificial neural network, partial least squares regression, support vector machine hybrid model, and logit model. Iranian Economic Review, 28(3), 1022-1049.
Rahmani, Behpour, & Shojaeddin. (2014). Investigating the effect of economic freedom on economic fluctuations in selected developing countries. Applied Theories of Economics, 1(3), 131-150.
Rashidian, Pakmaram, Asgar, & Beikzad. (2014). The relationship between state ownership and conditional accounting conservatism in companies listed on the Tehran Stock Exchange. Accounting and Social Interests, 4(3), 61-79.
Salehi, M., Daemi Gah, A., Akbari, F., & Naghshbandi, N. (2021). Does accounting details play an allocative role in predicting macroeconomic indicators? Evidence of Bayesian and classical econometrics in Iran. International Journal of Organizational Analysis, 29(1), 194-219.
Salehi, M., Ghanbari, E., & Orfizadeh, S. (2021). The relationship between managerial entrenchment and accounting conservatism. Journal of Facilities Management, 19(5), 612-631.
Salehi, M., Ghasemi Sarnish, T., & Rababah, A. (2025). The relationship between financial statement comparability and accounting conditional and unconditional conservatism. Asian Journal of Accounting Research, 10(3), 222-241.
Salehi, M., Lari DashtBayaz, M., Hassanpour, S., & Tarighi, H. (2020). The effect of managerial overconfidence on the conditional conservatism and real earnings management. Journal of Islamic Accounting and Business Research, 11(3), 708-720.
Shah Hosseini, N., Yalfani, A., & Khosravani, A. (2024). Designing a model for improving investors' decision-making and investment efficiency with emphasis on financial reporting quality: A mixed-method approach. Accounting, Finance and Computational Intelligence Quarterly, 2(3).
Shirayeh, S. A. (2024). Assessing the relationship between accounting conservatism and bankruptcy risk. In Creative Economy and New Business Management Approaches (pp. 182-199).
Downloads
Published
Submitted
Revised
Accepted
Issue
Section
License
Copyright (c) 2025 Mahdie Taboli, Tahere Razavi karamoz, Javad Taherizadeh anaripour (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
