Investigating Effects of Growth and Conservatism on Bias of ROI Compared with Internal Rate of Return

The Return on Investment (ROI) is widely regarded as a key measure of firm’s performance. The literature has recognized, mostly, that ROI will not reflect economic profitability. This study takes behavior of ROI as a function of two variables: past growth and accounting conservatism. The studied sam...

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Autores principales:	Ali Rahmani, Fatemeh Karami, Bahareh Ameri
Formato:	article
Lenguaje:	FA
Publicado:	Shahid Bahonar University of Kerman 2015
Materias:	unconditional conservatism growth of investment return on investment advertising and r&d expenditures internal rate of return Accounting. Bookkeeping HF5601-5689
Acceso en línea:	https://doaj.org/article/e01f8f0af99b48ad80dc36ea75439f76
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spelling	oai:doaj.org-article:e01f8f0af99b48ad80dc36ea75439f762021-11-04T19:47:44ZInvestigating Effects of Growth and Conservatism on Bias of ROI Compared with Internal Rate of Return2008-89142476-292X10.22103/jak.2015.963https://doaj.org/article/e01f8f0af99b48ad80dc36ea75439f762015-06-01T00:00:00Zhttps://jak.uk.ac.ir/article_963_45de09ee2d3565efcc31d09760ff3fd9.pdfhttps://doaj.org/toc/2008-8914https://doaj.org/toc/2476-292XThe Return on Investment (ROI) is widely regarded as a key measure of firm’s performance. The literature has recognized, mostly, that ROI will not reflect economic profitability. This study takes behavior of ROI as a function of two variables: past growth and accounting conservatism. The studied sample consists of 61 firms listed in the Tehran Stock Exchange, in which the required data for a 5-year-period of 1386-1390 was available. In this study the growth of investment refers to the growth of expenses for advertising and R&D, and conservatism means unconditional conservatism from direct transfer of these expenses to expenditure account. The growth of investment, which may stand at a level higher or lower than a critical value, measured by internal rate of return, may be regarded as moderate or excessive. The hypotheses were tested by the regression model of panel data. The findings showed that in case of conservative accounting, higher growth results in lower level of ROI. Conversely, in case of more conservative accounting, the ROI will increase, provided that new investments grow moderately over the relevant time horizon.Ali RahmaniFatemeh KaramiBahareh AmeriShahid Bahonar University of Kermanarticleunconditional conservatismgrowth of investmentreturn on investmentadvertising and r&d expendituresinternal rate of returnAccounting. BookkeepingHF5601-5689FAمجله دانش حسابداری, Vol 6, Iss 20, Pp 59-81 (2015)
institution	DOAJ
collection	DOAJ
language	FA
topic	unconditional conservatism growth of investment return on investment advertising and r&d expenditures internal rate of return Accounting. Bookkeeping HF5601-5689
spellingShingle	unconditional conservatism growth of investment return on investment advertising and r&d expenditures internal rate of return Accounting. Bookkeeping HF5601-5689 Ali Rahmani Fatemeh Karami Bahareh Ameri Investigating Effects of Growth and Conservatism on Bias of ROI Compared with Internal Rate of Return
description	The Return on Investment (ROI) is widely regarded as a key measure of firm’s performance. The literature has recognized, mostly, that ROI will not reflect economic profitability. This study takes behavior of ROI as a function of two variables: past growth and accounting conservatism. The studied sample consists of 61 firms listed in the Tehran Stock Exchange, in which the required data for a 5-year-period of 1386-1390 was available. In this study the growth of investment refers to the growth of expenses for advertising and R&D, and conservatism means unconditional conservatism from direct transfer of these expenses to expenditure account. The growth of investment, which may stand at a level higher or lower than a critical value, measured by internal rate of return, may be regarded as moderate or excessive. The hypotheses were tested by the regression model of panel data. The findings showed that in case of conservative accounting, higher growth results in lower level of ROI. Conversely, in case of more conservative accounting, the ROI will increase, provided that new investments grow moderately over the relevant time horizon.
format	article
author	Ali Rahmani Fatemeh Karami Bahareh Ameri
author_facet	Ali Rahmani Fatemeh Karami Bahareh Ameri
author_sort	Ali Rahmani
title	Investigating Effects of Growth and Conservatism on Bias of ROI Compared with Internal Rate of Return
title_short	Investigating Effects of Growth and Conservatism on Bias of ROI Compared with Internal Rate of Return
title_full	Investigating Effects of Growth and Conservatism on Bias of ROI Compared with Internal Rate of Return
title_fullStr	Investigating Effects of Growth and Conservatism on Bias of ROI Compared with Internal Rate of Return
title_full_unstemmed	Investigating Effects of Growth and Conservatism on Bias of ROI Compared with Internal Rate of Return
title_sort	investigating effects of growth and conservatism on bias of roi compared with internal rate of return
publisher	Shahid Bahonar University of Kerman
publishDate	2015
url	https://doaj.org/article/e01f8f0af99b48ad80dc36ea75439f76
work_keys_str_mv	AT alirahmani investigatingeffectsofgrowthandconservatismonbiasofroicomparedwithinternalrateofreturn AT fatemehkarami investigatingeffectsofgrowthandconservatismonbiasofroicomparedwithinternalrateofreturn AT baharehameri investigatingeffectsofgrowthandconservatismonbiasofroicomparedwithinternalrateofreturn
_version_	1718444624018669568

Investigating Effects of Growth and Conservatism on Bias of ROI Compared with Internal Rate of Return

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