The relationship between corporate governance mechanisms and accounting conservatism: The moderating role of audit quality

Subject Areas : Corporate governance

Rahman Doostian ¹ , Omid Farhad Touski ²

1 - Assistant Professor of Accounting Department, Khorramabad Branch, Islamic Azad University, Khorramabad, Iran.
2 - Assistant Professor of Accounting Department, Khorramabad Branch, Islamic Azad University, Khorramabad, Iran.

Received: 2023-11-28 Accepted : 2024-05-27 Published : 2024-09-24

Keywords: Corporate Governance Mechanisms, Accounting Conservatism, Duality of CEO Role, Board Independence.,

Abstract :

Conservatism can lead to lower agency costs in contracts and limit the opportunistic behavior of the financial reporting firm's management. A strong corporate governance structure will also lead to better management oversight, the production of timely accounting information, and increased speed of identifying bad news to alert the board and take action. Companies with a better corporate governance structure also exhibit a higher degree of conservatism. The main purpose of this study is to investigate the relationship between corporate governance mechanisms and accounting conservatism in 104 firms among the listed companies in Tehran Stock Exchange during 2015-2019.The independent variable of corporate governance was measured by the proxy of board size, board independence, Duality of CEO Role and the Khan and Watts model was used to measure the accounting conservative dependent variable. The audit quality moderator variable has been measured by the size of the audit firm. The research method was correlation and multivariate regression was used using combined data with random effects regression model approach.The findings indicate that board independence and separating the chair person and CEO roles and auditor type are negatively associated with accounting conservatism.The number of board members has no effect on the accounting conservatism. Companies that have more non-executive directors tend to be less accounting conservative. Companies that are also Duality of CEO Role are less accounting conservative. Companies whose audits have been audited by the audit organization are less accounting conservative.

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