Company stakeholders should consider external and other internal factors that may further influence decision making related to accounting policies

Oct 13, 2025 by talynt.org 127 views

The Influence of Managerial Ownership, Institutional Ownership, Independent and Leverage Commissioners on Accounting Conservatism (Study of Industrial and Chemical Sector Companies Listed on the IDX in 2018-2021)

Introduction

Accounting conservatism is a crucial aspect of financial reporting, as it helps to ensure the accuracy and reliability of financial statements. In recent years, there has been a growing interest in understanding the factors that influence accounting conservatism, particularly in the context of managerial ownership, institutional ownership, independent commissioners, and leverage. This study aims to investigate the effect of these factors on accounting conservatism in industrial and chemical sector companies listed on the Indonesia Stock Exchange (IDX) during the 2018-2021 period.

Background

Accounting conservatism is a principle that requires companies to recognize expenses and losses in a timely manner, while deferring the recognition of revenues and gains. This principle is essential in ensuring the accuracy and reliability of financial statements, as it helps to prevent companies from overestimating their financial performance. In recent years, there has been a growing interest in understanding the factors that influence accounting conservatism, particularly in the context of managerial ownership, institutional ownership, independent commissioners, and leverage.

Managerial Ownership and Accounting Conservatism

Managerial ownership refers to the ownership of a company by its managers or executives. Research has shown that managerial ownership can have a significant impact on accounting conservatism, as managers may prioritize short-term goals and profits over long-term sustainability. In this study, we investigate the effect of managerial ownership on accounting conservatism in industrial and chemical sector companies listed on the IDX.

Institutional Ownership and Accounting Conservatism

Institutional ownership refers to the ownership of a company by institutional investors, such as pension funds, mutual funds, and insurance companies. Research has shown that institutional ownership can have a significant impact on accounting conservatism, as institutions may prioritize short-term goals and profits over long-term sustainability. In this study, we investigate the effect of institutional ownership on accounting conservatism in industrial and chemical sector companies listed on the IDX.

Independent Commissioners and Accounting Conservatism

Independent commissioners refer to the members of a company's board of directors who are not affiliated with the company or its management. Research has shown that independent commissioners can have a significant impact on accounting conservatism, as they may provide a more objective and independent perspective on financial reporting. In this study, we investigate the effect of independent commissioners on accounting conservatism in industrial and chemical sector companies listed on the IDX.

Leverage and Accounting Conservatism

Leverage refers to the use of debt financing by a company to fund its operations. Research has shown that leverage can have a significant impact on accounting conservatism, as companies with high levels of debt may be more likely to prioritize short-term goals and profits over long-term sustainability. In this study, we investigate the effect of leverage on accounting conservatism in industrial and chemical sector companies listed on the IDX.

Methodology

This study uses a purposive sampling technique to select a sample of 23 industrial and chemical sector companies listed on the IDX during the 2018-2021 period. The data sources used in this study include the official IDX website and various financial databases. The data analysis was carried out using various statistical techniques, including descriptive statistics, classical assumption tests, normality tests, autocorrelation tests, multicollinearity tests, heteroscedasticity tests, multiple regression analysis, and hypothesis testing using SPSS version 26.

Results

The results of this study show that institutional ownership has a significant negative influence on accounting conservatism, while managerial ownership, independent commissioners, and leverage do not have a significant impact on accounting conservatism. This suggests that institutional ownership may prioritize short-term goals and profits over long-term sustainability, leading to a lower level of accounting conservatism.

Analysis of the Effect of Institutional Ownership

Institutional ownership often prioritizes short-term goals and profits, which can lead to a lower level of accounting conservatism. This is because institutions tend to focus more on the current recognized earnings results, rather than considering long-term risks that can affect future financial statements.

Relevance of Managerial Ownership and Independent Commissioners

The results of this study show that managerial ownership and independent commissioners do not have a significant impact on accounting conservatism. This can be explained by the fact that company internal factors, such as manager's personality or independence of the commissioners, may not always contribute to conservative accounting policies.

The Role of Leverage in Accounting Conservatism

Leverage, which is usually expected to have an influence on the way the company manages its financial risks, does not show a significant impact on accounting conservatism in this study. This may be related to the position of companies in the industrial and chemical sectors that tend to have a stable capital structure and good risk management.

Conclusion

Overall, the results of this study indicate that managerial ownership, institutional ownership, independent commissioners, and leverage do not have a significant influence on accounting conservatism in industrial and chemical sector companies listed on the IDX. This study highlights the importance of considering external and other internal factors that may further influence decision making related to accounting policies, especially in a broader context in the industrial and chemical sectors. Thus, company stakeholders are expected to better understand the dynamics that affect accounting conservatism and consider factors outside ownership and corporate governance structure in strategic decision making.

Recommendations

Based on the findings of this study, the following recommendations are made:

Company stakeholders should consider external and other internal factors that may further influence decision making related to accounting policies.
Companies should prioritize long-term sustainability over short-term goals and profits.
Independent commissioners should be appointed to provide a more objective and independent perspective on financial reporting.
Companies should maintain a stable capital structure and good risk management to minimize the impact of leverage on accounting conservatism.

Limitations

This study has several limitations, including:

The sample size is relatively small, which may limit the generalizability of the findings.
The study only focuses on industrial and chemical sector companies listed on the IDX, which may not be representative of other industries or companies.
The study only uses a purposive sampling technique, which may not be representative of the entire population.

Future Research Directions

Future research should aim to:

Investigate the effect of other factors on accounting conservatism, such as corporate governance structure, board composition, and executive compensation.
Examine the impact of accounting conservatism on company performance, such as stock price, earnings, and financial stability.
Develop a more comprehensive model of accounting conservatism, incorporating multiple factors and variables.

Conclusion

In conclusion, this study provides new insights into the factors that influence accounting conservatism in industrial and chemical sector companies listed on the IDX. The findings suggest that institutional ownership has a significant negative influence on accounting conservatism, while managerial ownership, independent commissioners, and leverage do not have a significant impact on accounting conservatism. This study highlights the importance of considering external and other internal factors that may further influence decision making related to accounting policies, especially in a broader context in the industrial and chemical sectors.
Q&A: The Influence of Managerial Ownership, Institutional Ownership, Independent and Leverage Commissioners on Accounting Conservatism

Q: What is accounting conservatism and why is it important?

A: Accounting conservatism is a principle that requires companies to recognize expenses and losses in a timely manner, while deferring the recognition of revenues and gains. This principle is essential in ensuring the accuracy and reliability of financial statements, as it helps to prevent companies from overestimating their financial performance.

Q: What are the key factors that influence accounting conservatism?

A: The key factors that influence accounting conservatism include managerial ownership, institutional ownership, independent commissioners, and leverage. These factors can have a significant impact on a company's financial reporting and decision-making processes.

Q: What is the role of managerial ownership in accounting conservatism?

A: Managerial ownership refers to the ownership of a company by its managers or executives. Research has shown that managerial ownership can have a significant impact on accounting conservatism, as managers may prioritize short-term goals and profits over long-term sustainability.

Q: What is the role of institutional ownership in accounting conservatism?

A: Institutional ownership refers to the ownership of a company by institutional investors, such as pension funds, mutual funds, and insurance companies. Research has shown that institutional ownership can have a significant impact on accounting conservatism, as institutions may prioritize short-term goals and profits over long-term sustainability.

Q: What is the role of independent commissioners in accounting conservatism?

A: Independent commissioners refer to the members of a company's board of directors who are not affiliated with the company or its management. Research has shown that independent commissioners can have a significant impact on accounting conservatism, as they may provide a more objective and independent perspective on financial reporting.

Q: What is the role of leverage in accounting conservatism?

A: Leverage refers to the use of debt financing by a company to fund its operations. Research has shown that leverage can have a significant impact on accounting conservatism, as companies with high levels of debt may be more likely to prioritize short-term goals and profits over long-term sustainability.

Q: What are the implications of this study for company stakeholders?

A: The findings of this study suggest that company stakeholders should consider external and other internal factors that may further influence decision making related to accounting policies. This includes prioritizing long-term sustainability over short-term goals and profits, appointing independent commissioners to provide a more objective and independent perspective on financial reporting, and maintaining a stable capital structure and good risk management to minimize the impact of leverage on accounting conservatism.

Q: What are the limitations of this study?

A: This study has several limitations, including a relatively small sample size, a focus on industrial and chemical sector companies listed on the IDX, and the use of a purposive sampling technique.

Q: What are the future research directions for this study?

A: Future research should aim to investigate the effect of other factors on accounting conservatism, examine the impact of accounting conservatism on company performance, and develop a more comprehensive model of accounting conservatism incorporating multiple factors and variables.

Q: What are the practical implications of this study for companies and regulators?

A: The findings of this study suggest that companies and regulators should prioritize long-term sustainability over short-term goals and profits, appoint independent commissioners to provide a more objective and independent perspective on financial reporting, and maintain a stable capital structure and good risk management to minimize the impact of leverage on accounting conservatism.

Q: What are the policy implications of this study for regulators and policymakers?

A: The findings of this study suggest that regulators and policymakers should consider the impact of accounting conservatism on company performance and financial stability, and develop policies to promote long-term sustainability and good corporate governance practices.

Q: What are the implications of this study for accounting standard setters?

A: The findings of this study suggest that accounting standard setters should consider the impact of accounting conservatism on company performance and financial stability, and develop standards that promote long-term sustainability and good corporate governance practices.