A comparative analysis of the impact of financial constraints on accounting conservatism: An empirical study of Iraqi and Jordanian banks from 2006 to 2023

Abstract

The study aims to identify the effect of financial constraints on the level of accounting conservatism in a sample of banks listed on the Iraq and Amman Stock Exchanges for the period 2006–2023. To achieve the objectives of the study, a quantitative empirical approach involving mathematical assessment and analysis was adopted. The sample of the study comprised 26 banks from the Iraqi and Jordanian contexts, selected through a purposive sampling technique, relying on the annual financial statements of these banks as published on the respective stock exchange platforms.

The study revealed several findings, the most important of which is that financial constraints have an insignificant impact on the level of accounting conservatism in the context of the Iraqi banks. In contrast, the results showed a positive and significant effect of financial constraints on the level of accounting conservatism in Jordanian banks. Based on these findings, the study proposed several recommendations. For the Iraqi banking industry, the study recommended enhancing transparency and reducing bureaucratic barriers. These measures could encourage the proper application of financial reporting standards, thereby mitigating the financial constraints affecting this sector. For the Jordanian banking industry, the study recommended restructuring financial risk management to align with developments and challenges in the banking environment. This restructuring could help Jordanian banks achieve an effective balance between borrowing and accounting conservatism, ensuring strong financial stability under varying economic conditions.