The Impact of Accounting Conservatism on Corporate Equity Valuation Moderated by Good Corporate Governance

  • Bayu Pasupati
Keywords: conservatism instrument variable, market-to-book ratio, corporate governance mechanism


The purpose of the current article is to determine the impact of accounting conservatism phenomenon on the evaluating of corporate capital and the ability of good corporate governance (GCG) to interact with the effect of accounting conservatism. As the samples for this study were taken companies that constantly fall into the LQ45 index during the reporting period of 2010-2012. In general, there were taken 29 companies (with 87 observations). Accounting Conservative Proxy for the difference between net income indicators and operating cash flow divided by average total assets (ACC_CON). The assessment of corporate capital by proxy according to the ratio of the market to the balance sheet. The corporate governance mechanism is measured using managerial ownership, the percentage of independent commission members and the size of the audit committee. The results of the conducted survey showed that accounting conservatism has a significant positive effect on the assessment of corporate capital. The whole mechanism of Good Corporate Governance (GCG) used in this study, property management, the share of independent members of the commission and the audit committee, was a moderating variable that interacts between accounting conservatism and corporate capital appreciation. Since this study shows that 36% of the dependent variables are attributable to independent variables, the next researcher may look for other independent variables that may affect the assessment of capital, such as economic status, market perception, company or world events, human psychology, and so on. The prospect of the study may also involve the usage of a different power of attorney for accounting conservatism estimation.