Abstract
This research has the aim of reviewing relationship between some corporate governance mechanisms and conservatism in financial reports. Conservatism is potentially useful for corporate governance in some ways: first it reduce opportunistic engagement of management against itself. Second, it results in management report about loss from selling assets and ceases operation and finally it prevents continuity of management investment in projects with negative net present value. Estimated coefficient of independent variable of ownership concentration is positive and their p-value is less than 5%, so it can be said that there is a positive and significant relationship between ownership concentration and conservative accounting and the first sub-hypothesis is accepted. Estimated coefficient of independent variable of BD (Board of directors) size is positive and its p-value is higher than 5%, so it can be said that there is no significant relationship between BD size and conservative accounting then the second sub-hypothesis is rejected. Estimated coefficient of independent variable of BD composition is positive and its p-value is less than 5%, so it can be said that there is a positive and significant relationship between BD composition and conservative accounting then the third sub-hypothesis is accepted. Estimated coefficient of independent variable of shareholder directors is negative and its p-value is higher than 5%, so it can be said that there is no significant relationship between shareholder directors and conservative accounting then the forth sub-hypothesis is rejected.
Highlights
By developing companies and increasing BD’s duties and powers, corporate governance system is increasingly considered
As we can see in table 5, estimated coefficients of the independent variables of ownership concentration are positive and its p-value is less than 5%
It can be said that there is no significant relationship between BD size and accounting conservatism and the second sub-hypothesis of the research is rejected
Summary
By developing companies and increasing BD’s duties and powers, corporate governance system is increasingly considered. Corporate governance is a set of controlling mechanisms inside and outside company which establishes a good balance between shareholders equities from one side and BD’s requirements and powers from the other side. Conservatism is a limitation which takes this ability and this opportunistic trend from managers In this research it has been investigated the relationship between corporate governance and accounting conservatism of listed companies in Tehran Stock Exchange. There are two opponent insights about the relationship between them According to this theory that conservatism causes decreasing unreliability and information asymmetry between different groups, the request for conservatism is increased in circumstances that representation issue is going to be more critical. This paper tries to answer this main question? Is there a significant relationship between corporate governance mechanisms and accounting conservatism?
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