الفهرس 
RESEARCH FRAMEWORKOnly 14 pages are availabe for public view
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Abstract
The decision making process has become a very critical and essential issue and process in any entity, whether it is a commercial or a non-commercial entity. The importance of the decision making process arises as a result of its strong tight unbreakable bond to important procedures and actions in any entity as it’s related to managerial short and long term planning, organizing, directing and controlling functions. It also has extensive consequences on all levels of the entity. Decision making is also vital to achieve the entities’ goals and objectives within specified time and financial plan. Hence, decision-making is a universal function aimed at achieving entities’ goals.
Decisions become more sophisticated and complicated when they are accompanied with risk and uncertain outcomes. As the level of the riskiness of the decision increases, the difficulty and procedures that are carried out increase and every step becomes of a greater importance and needs to be more studied, planned and investigated carefully, in details, with a very high degree of awareness.
There are many factors that affect the decision making process such as; the accounting conservatism, the nature of information, the level of riskiness and the behavior of the investor subjected to risk situation.
Accounting conservatism, the nature of the information and risk takers’ behavior are three very important terms which play huge and important roles in the decision making process in any commercial or non-commercial entity.
1.2 Research Problem
Accounting conservatism is one of the oldest and most important surviving principles of accounting which was subjected to a wide range of various criticisms.
Broadly speaking, accounting conservatism is the tendency of accountants, under uncertainty, to anticipate no gains, but anticipate all the possible losses.
So, accountants tend to understate, rather than overstate, net assets and net income if it appears unrealistically high. As for the liabilities and losses, accountants tend to overstate them rather than understate them.
Therefore, as a consequence of applying accounting conservatism, companies become very cautious, conservative and pessimistic, or in other words to play it very safe, in order to create more reliable financial statements, and to be very carefully prepared, considerate and ready for any possible losses that could occur as much as possible and to be able to forecast them by previously being prepared and putting them in consideration as much as possible.
Due to the dynamic and continuous changes, innovations and developments that occur daily in our community, decision making has become a more sophisticated and complicated process especially when they are accompanied with a degree of risk, therefore risk taking has become an important issue and concern, it is even sometimes a necessity in the decision making process.
So accounting conservatism could cause accountants to take no risk, or the least risk possible, in their decision making process and in their evaluation of any situation or transaction which might not be accepted by many investors, who are risk seekers for example or their business nature requires more and high risk taking levels, and this could lead many investors to violate an accounting policy in order to take riskier decisions, investments and actions.
So the accounting conservatism could affect the investors’ risk taking level and also their risk taking behavior.
Accounting conservatism could direct the accountant to take certain very low level risk investment and this can’t be applied in many entities.
So according to the previous studies the main research problem is determined, which is how the accountants could take risks, specifically high risk decisions and investments, without violating an important and essential accounting principle which is the accounting conservatism principle, with regards to having sufficient information to make the right and optimum decisions. Therefore, the researcher was interested to investigate whether the accounting conservatism affects the investors’ risk taking behavior and if the investors could take different risk level investments without violating it.
1.3 Research Questions
Based upon the research problem, the main research question is: How the accounting conservatism affects the investors’ risk taking behavior?
The sub questions are:
1. What is the importance of accounting conservatism and its application? And can it be violated?
2. To what extent do entities apply accounting conservatism? And what are the consequences of its application?
3. What are the pros and cons of applying accounting conservatism? And what is the criticism against it and its effect?
4. What are the different types of risk takers, their behavior and their behavioral patterns?
5. What is the degree of acceptance of the different risk takers’ behavior types to the accounting conservatism and its effect on them and their risk taking process?
6. What’s the importance of the nature of information in the risk taking process? And the investors’ risk taking degree of dependency on it?
7. Does the decision maker depend on the accounting information obtained from the financial statements? To what extent?
8. Do gender differences affect the risk taking behavior?
1.4 Research Objectives
As a consequence of the research problem previously mentioned, the importance of this research appears which directs and guides to the main objective of the research.
The main objective of the research is to fill in the gap and find a relationship between nature of information, investors’ risk taking behavior and accounting conservatism, and to find and examine the effect of the accounting conservatism on both nature of information and the investors’ risk taking’s behavior.
The main objective can be reached by achieving the following sub-objectives:
1. Examine the relationship between accounting conservatism and the nature of the information that is required, essential and must be found in the financial statements.
2. Determine the degree of dependency of the investors on the information presented and reported in the financial statements generally and in the presence and absence of the accounting conservatism.
3. Determine the relationship between accounting conservatism and investors’ different risk taking behavior types.
4. Examine the relationship between accounting conservatism, the nature of the information and investors’ risk taking’s behavior.
5. Determine the effect of the consequences of applying the accounting conservatism on the investors’ decision making process.
1.5 Research Hypotheses
There is a relationship between the application of accounting conservatism in organizations and the investors’ risk taking behavior in various directions, which are described as the following:
H1 a: There is a direct relationship between the application of accounting conservatism in organizations and the quality of the information reported in the financial statements.
H1 b: There is a relationship between accounting conservatism and investing process in Egypt.
H1 c: The degree of acceptance of the application of the accounting conservatism differs according to the type of risk taker and his behavior.
H1 d: The nature of information has an effect on the investors’ risk taking behavior.
H1 e: There is a direct relationship between applying accounting conservatism and the degree of dependency of the investors on information reported in the financial statements.
1.6 Research Methodology
The research methodology used in this study to analyze the data and test which will be collected and test the hypotheses is the qualitative method.
The data will be collected by using the survey approach.
The qualitative method was chosen to be used because of the nature of the research and so the survey would be the most suitable and useful method for examining the different behavioral patterns of investors with different risk taking behavior under various risk taking situations and conditions.
The survey will include structured questions.
The survey will be distributed on a sample size of one hundred participants.
The population of the study will include the organizations which face different types of risks from risk free organizations to high risk organizations.
The whole population will be located in Egypt only.
The sample is a non-random sample, it is a purposive sample which is specified and chosen to include the following:
1. Business men and investors in private and public firms.
2. Top management in organizations such as companies and authorities.
3. Individuals working in the accounting fields with different authorities and positions.
4. Employees and investors in the stock market.
5. Employees, business men and investors in banks.
1.7 Research Variables
There are 2 variables for the research which are the dependent variable and the independent variables which are identified as following:
a. Independent variable: The consequences of accounting conservatism application in entities.
b. Dependent variables: the investors’ risk taking behavior which is directly affected by the risk taking attitudes which are classified into three types as follows:
1. Risk seeker
2. Risk aversion
3. Risk neutral.
1.8 Research Survey:
The survey method is used as a measurement technique to test the hypothesis of the research. The population of the study includes the organizations which face different types of risks from risk free organizations to high risk organizations all located in Egypt.
In order to show the degree of dependency of the investors on the accounting information reported in the financial statements applying accounting conservatism and its impact on their decision making process and on the investors’ behavior, its required first to determine the individual investors’ ability to make decision, their ability to make decisions that engage risk and their risk taking behavior, then categorize two types of investors, according to their degree of dependency on and acceptance to the accounting conservatism, which are the dependent and the independent, then it will be illustrated how their degree of dependency on the accounting conservatism can impact their risk taking behavior.
Therefore, the results of the thesis are attained by using two surveys. The first survey will be prepared in a manner to determine the respondents’ decision making capability, their ability to make decisions engaging risk, their risk attitude which will mainly affect their risk taking behavior. The respondents will include individuals in different sectors with different risk levels. The second survey will be prepared for the purpose of determining whether the respondents depend or not, while taking risky decisions, on the accounting information reported in the financial statements which follow the accounting conservatism.
The results of the two surveys will be compared with each other and analyzed in order to test the hypotheses of the research and determine the effect of applying accounting conservatism in the financial reporting on the investors’ risk taking behavior by calculating the coefficient correlation (r) and also Staseven method is used to reach the targeted objective.
The sample is a non-random sample, it is a purposive sample which is specified and chosen to include the following:
1. Business men and investors in private and public firms.
2. Top management in organizations such as companies and authorities.
3. Individuals working in the accounting fields with different authorities and positions.
4. Employees and investors in the stock market.
5. Employees, business men and investors in banks.
There are 100 respondents which are classified into two groups including individuals with different risk behavior levels. The first group will be aiming to determine the investors’ decision making capability to decisions engaging risk, their risk taking attitudes and risk taking behavior. The second group will be targeted to find the importance of the application of the accounting conservatism in the financial reporting in the organizations and the degree of dependency of investors on it. The surveys also measure the impact of the accounting conservatism on the quality of the accounting information reported in the financial statements.
The Likert five point rating scale is used in the survey. Closed ended questions only are included in the survey. The surveys were distributed to respondents written in Arabic language. The two surveys were distributed to respondents through face to face meetings and through the internet.
The survey is reviewed, revised and approved by professionals and specialized authorities in the field of statistics and psychology. Each question is verified and its degree of credibility was assured by those professionals.
The questions in the survey were inspired from and based on the previous studies and researches, collected and written in a manner that could assist in reaching the thesis’ objectives.
The survey related to the investors’ risk taking behavior was established by Mann, et.al. It was developed and translated into an Arabic format to be used by the Arab countries and in specific Egypt by Dr. Khaled Ahmed Galal. [49] The survey was developed and used by the researcher in order to achieve the objectives of the thesis and test its hypotheses. The updates survey was then approved by the famous psychologist Dr. Anwar Higab.