Abstract
This research is motivated by the controversy regarding the benefits of conservative accounting numbers, intended to determine the direct effect of leverage and size on firm value, and the indirect influence of these variables through unconditional conservatism as an intervening variable on firm values in 2010 - 2017 on the Stock Exchange Indonesia. The results were that the variable unconditional conservatism can mediate the influence between size on firm value. There is a direct influence between leverage and size on firm value.
Highlights
Conservatism is a cautious reaction to the uncertainty that exists so that uncertainties and risks associated in a business situation can be adequately considered
This is supported by research conducted by Lo (2005) and LaFond and Roychowdhury (2007) stating that leverage has a positive effect on accounting conservatism
The results of this study indicate that it is assumed that large companies experience a tendency to attract attention and become a public spotlight, so that it will encourage the firm to implement better firm governance structures and mechanisms, the size of the firm has a positive effect on firm value
Summary
Conservatism is a cautious reaction to the uncertainty that exists so that uncertainties and risks associated in a business situation can be adequately considered. The higher the level of leverage, the greater the likelihood of conflicts that will arise between shareholders and bondholders, which in turn will influence conservative contractual demand for accounting (Ahmed and Duellman, 2007) This is supported by research conducted by Lo (2005) and LaFond and Roychowdhury (2007) stating that leverage has a positive effect on accounting conservatism. Research conducted by Zmijewski and Hagerman (1981) supports size hypothesis, which states that large companies will choose accounting procedures that reduce reported earnings for the current period or the financial statements presented tend to be conservative.
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