GOOD CORPORATE GOVERNANCE AND ACCOUNTING CONSERVATISM: MODERATING ROLE OF LEVERAGE IN INDONESIAN MANUFACTURING FIRMS
DOI:
https://doi.org/10.70248/jakpt.v4i1.4709Abstract
This study examines whether Good Corporate Governance (GCG) affects accounting conservatism among Indonesian listed manufacturing firms, and whether leverage moderates that relationship. The 2020–2024 period was chosen because it opens with the onset of COVID-19, a shock likely to have unsettled conservatism practices, and offers the most recent data available at the time of the study. A purposive sample of 62 firms with complete GCG, conservatism, and leverage data across 2020–2024 yielded 309 firm-year observations, compiled from annual reports and the Bloomberg Governance Disclosure Score. Data were analyzed using Fixed Effect Model panel regression under both a direct-effect and a moderated specification. Neither GCG nor its interaction with leverage shows a statistically significant effect on accounting conservatism, while profitability (ROA) and firm size both show significant effects, indicating that firm fundamentals, not governance disclosure or debt-related monitoring, drive conservatism in this sample. For the financial accounting literature, this suggests that GCG scores built on disclosure completeness do not necessarily proxy for the enforcement strength agency theory assumes drives conservative reporting, and that creditor monitoring and board-level oversight operate as separate, non-reinforcing channels rather than the complementary mechanism assumed when leverage is modeled as a governance moderator. The findings extend governance–conservatism research to a concentrated-ownership, civil law developing market, indicating that formal governance-disclosure metrics may not yet capture the institutional enforcement such settings require.
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