The Relationship between Accounting Conservatism & Corporate Governance

Subject Areas : Management Accounting

مهدی مرادزاده فرد ¹ (مسئول مکاتبات)
بهمن بنی مهد ² (ندارد)
مهدی دیندار یزدی ³ (ندارد)

Received: 2010-12-11 Accepted : 2011-04-11 Published : 2011-03-21

Keywords: accounting conservatism, Corporate Governance, Institutional investors, Internal Auditor, independent directors,

Abstract :

This study examines the relationship between corporate governance mechanismsand accounting conservatism in listed companies of Tehran Stock Exchange. In thisstudy, In order to examine the relationship between conservatism and corporategovernance, the ownership percentage of institutional shareholders, the percentage ofindependent directors, separation of duties of CEO and the chairman of the board ofdirectors, and the existence of the internal auditor at companies as corporategovernance mechanisms and the methods (giovly and Hayn), and (Ball andShivakumar) as conservatism model have been used in 71 firms which listed inTehran Stock Exchange from 2004-2009.Our findings indicate this is a limitation due to low sample size and therequirement to model Ball and Shivakumar large number of observations and duringthe long period of time, in terms of the said model were not statistically significantand take advantage of this method in Iran currently not possible. Furthermore, ourexamination shows that there is a positive relationship between the ownershippercentage of institutional shareholders and percentage of independent directors and anegative association between separation of duties with CEO and the chairman of theboard of directors with the giovly and Hayn model of conservation. We did notobserve a significant relationship between the level of conservation and the existenceof internal auditor in firms in Tehran Stock Exchange. Our results provide support forcomplementary approach regarding conservatism and the corporate governancemechanisms.