Accounting conservatism and money laundering risk. Issue 2 (3rd February 2020)

• Record Type: Journal Article
• Authors: Bolgorian, Meysam; Mayeli, Ali
• Is Part Of: Accounting research journal. Volume 33:Issue 2(2020)
• Page Start: 343
• Page End: 361
• Publication Date: 2020-02-03
• Subjects: Risk -- Money laundering -- Accounting conservatism; Accounting -- Periodicals; Investments -- Periodicals; 657.072
• DOI: 10.1108/ARJ-12-2018-0221
• Languages: English
• ISSNs: 1030-9616

Abstract

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.