Quarterly Studies in Banking Management and Islamic Banking

The Effect of Information Asymmetry and Financial Distress on the Relationship between Accounting Conservatism and Loan Quality Portfolio in Iran's Banking System

Document Type : Original Article

Author

rahim bonabi ghadim

Asistance Prof in Accounting, Hashtrood Branch, Islamic Azad University, Hashtrood, Iran

https://doi.org/10.22034/jifb.2022.355705.1375
Abstract
Due to contractual demands, litigation costs and legal preferences in banks, the role of conditional conservatism is important in order to increase banking transparency. Also, in the conditions of information asymmetry and financial distress, uncertainty about the quality of loans is reduced, bank managers try to reduce agency costs by increasing the quality of information through conservative reporting and increasing the informing about banks real value. Based on this, the aim of the research is to investigate the effect of information asymmetry and financial distress on relationship between accounting conservatism and loan quality portfolio in Iran's banking system. For this purpose, the data of 15 banks accepted in the Iranian capital market between 2012 and 2020 have been used. The analysis of the results using multiple regression showed that conditional conservatism has increased the loan quality portfolio (increasing the quality of bank assets and reducing the ratio of non-current claims), and informational asymmetry and financial distress with a positive effect have modified and intensified the relationship between conditional conservatism and loan quality portfolio.

Keywords

Conditional conservatism
Loan quality portfolio
Information asymmetry
Financial distress

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