Good Corporate Governance and Bondholder-Shareholder Conflict: Case of Implementation Accounting Conservatism for Mining Company

Abstract

The application of Accounting Conservatism Principle can lead to different kind of assessment in various companies. Due to the application of this principle, financial statements are no longer considered as obligatory tools to evaluate company's risk. On the contrary, other parties state that the application of the Accounting Conservatism Principle can generate reasonable financial reports and provide relevance in Financial Information. The objective of this study is to analyze the effect of good corporate governance and bondholder-shareholder conflict against company accounting conservatism. The analysis of accounting conservatism is done using quantitative methods. In addition, data testing is done using classical assumption and hypothesis testing is conducted using multiple linear regression models. The level of accounting conservatism is measured using the value of accruals and the market value. The sample used is a mining company listed on the Indonesia Stock Exchange in 2014-2018. The results of the research show that each company implements accounting conservatism on a different level. In managerial ownership of accrual accounting, the effects of conservatism can be seen in several aspects; it is different from the approach in which the market value of managerial ownership did not affect the significance of accounting conservatism. Institutional ownership does not affect accounting conservatism when measured using accrual approach, but it has the effect on market value when measured. The presence of independent directors and market value when measuring accrual are able to influence the level of accounting conservatism.

The Influence of Managerial Ownership, Institutional Ownership, Investment Opportunity Set, and Capital Intensity on Accounting Conservatism with Political Connections as A Moderation Variable

“…These findings are not in line with the research of El-Habashy (2019) and El-Haq et al (2019), which shows that the results of institutional ownership have a negative effect. Meanwhile, other results are shown by Alves (2021), Waluyo (2019), and Salehi & Sehat (2019), which explain that institutional ownership has no effect. The investment opportunity set studied by Sholikhah &Baroroh (2021), andPermatasari (2020) shows a positive influence on accounting conservatism.…”

“…The higher the managerial ownership, the more careful the manager will present financial reports by conservatively presenting profits. This hypothesis is strengthened by the results of Indarti et al (2021), Alves (2020), andWaluyo (2019) show that managerial ownership has a positive effect on accounting conservatism.…”

“…Managerial ownership, studied by Chiedu Christian et al (2022) and Waluyo (2019), shows a positive relationship between managerial ownership and accounting conservatism. Another result was shown by Pasko et al (2021), Hajawiyah et al (2020), and Liu (2019), which shows that managerial ownership has a negative effect.…”