Navigating Risk and Returns: Unraveling the Impact of Accounting Conservatism on Corporate Performance through Strategic Decision-Making

DOI

10.2991/978-94-6463-827-1_19How to use a DOI?

Keywords

Accounting Conservatism; Strategic Decision-Making; Corporate Performance

Abstract

Accounting conservatism is a key aspect of financial reporting, prioritizing the prompt recognition of losses over the postponement of gains, which in turn influences corporate decision-making and performance. A few studies have examined the mediating effect of strategic decision-making, although existing literature has explored its direct impact on financial performance. Addressing this gap, this research aims to investigate how strategic decision-making affects the relationship between accounting conservatism and firm performance, thus providing a conceptual framework that aligns financial reporting styles with corporate strategy. Utilizing the narrative review technique, a systematic critical examination of relevant literature was conducted, synthesizing the results of prior studies. The study findings identified that conditional conservatism enhances financial transparency, minimizes managerial opportunism, and encourages prudent investment choices, ultimately improving corporate performance. However, excessive unconditional conservatism may limit strategic flexibility, leading to underinvestment and fewer growth opportunities. This study contributes theoretically by integrating agency theory and strategic management perspectives, highlighting the role of accounting reporting practices in decision-making processes and organizational outcomes. Practically, the findings offer significant implications for corporate managers, regulators, and investors, emphasizing the importance of a balanced approach to conservatism that considers both financial stability and strategic agility. Given the limitations of the narrative review method, further research is encouraged to utilize empirical techniques, including quantitative modeling and longitudinal studies, to test the proposed framework across various industries and economic contexts. By addressing these limitations, future studies can gain a deeper understanding of the complex relationship between accounting conservatism, strategic decision-making, and firm performance.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Jaya Kumar Shanmugam
AU  - Intan Marzita Saidon
AU  - Roshima Haji Said
AU  - Marjan Mohd Noor
PY  - 2025
DA  - 2025/08/22
TI  - Navigating Risk and Returns: Unraveling the Impact of Accounting Conservatism on Corporate Performance through Strategic Decision-Making
BT  - Proceedings of the 3rd International Conference on Business, Finance, Management and Economic (BizFAME 2024)
PB  - Atlantis Press
SP  - 283
EP  - 296
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-827-1_19
DO  - 10.2991/978-94-6463-827-1_19
ID  - Shanmugam2025
ER  -