Accounting Conservatism from the Perspective of Firm Characteristics and Corporate Governance: Evidence from the Consumer Non-Cyclicals Sector

Abstract

Accounting conservatism reflects prudence in financial reporting by limiting the overstatement of assets and earnings and enhancing information reliability. This study examines the effects of firm size, Return on Assets (ROA), and the proportion of the board of commissioners (PBC) on accounting conservatism in manufacturing companies in the Consumer Non-Cyclicals sector. Using purposive sampling, the study selected 34 companies listed on the Indonesia Stock Exchange during 2019–2023. The results show that firm size and ROA have no significant effect on accounting conservatism, whereas PBC has a negative and significant effect at the 10% significance level. These findings indicate that firm size and profitability are not primary determinants of accounting conservatism, while corporate governance mechanisms play a more relevant role. The findings provide partial support for Agency Theory and highlight the importance of effective oversight mechanisms in promoting conservative financial reporting practices.