The Effect of Accounting Conservatism and its Impacts on the fair Value of the Corporation: an empirical study on Jordanian Public Joint-stock Industrial Companies
Dr. Sa’ad Al-Sakini, Dr. Hanan Al-Awawdeh

Abstract
This study aims to test the effect of accounting conservatism on the fair value of Jordanian industrial companies during the period 2006 - 2013, based on a sample of 30 Jordanian industrial corporations. The dependent variable of the study includes the fair value of the company, while the independent variables included the accounting conservatism, in addition to five control variables, namely the size of the company, rate of assets realizations, the ratio of debt to ownership, distributed dividends ratio, and proportion of fixed assets. The results showed a variation between the extent of practicing the accounting conservatism by the industrial Jordanian companies and the lower level of accounting conservatism in general. Results also indicated the existence of clear diversity in the size of the Jordanian industrial corporates and a variation in the liability percent and the significant difference in their profits and distributed profits ratios. However, in general their fixed assets ratio is closer. The study concluded, through the use of joint regression, the existence of an inverse relationship between the accounting conservatism and the fair value; where the low accounting conservatism plays a major role in the fair market value of the Jordanian industrial companies. This confirms the negative relationship between the concept of the accounting conservatism and fair value, which reflects implicitly the relationship between the conservatism and the historical value approach. The results also showed that the size if the company’s assets and profitability are deemed the most important factors which have positive impact on the fair value of the companies. The ratio of debts impact negatively on the fair value of the company. Meanwhile, the ratio of profits distribution and fixed assets has no effect on the fair value. The results also showed that the size of the company's assets and their profitability is one of the most important factors that have a positive impact on the fair value of the companies, while the ratio of debt negatively impact the fair value, whereas the ratio fixed assets ratio distribution has no effect on the fair value. The study indicated that it is necessary that the applied principles and rules of fair value accounting should not make to disregard the principle of caution, which is the safety valve against any unexpected reflections on the asset values and revenues. The excessive reliance on the fair value may result to increase the exposure of companies to market risks and sudden movements of prices.

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