The Role of Financial Structure and Ownership in Determining Accounting Conservatism: A Study on Leverage, Managerial Ownership, and Financial Distress Factors

Abdullah Bahfen; Sovi Ismawati Rahayu

doi:10.58777/efi.v1i1.503

Authors

Abdullah Bahfen Faculty of Economics and Business, YARSI University, Jakarta
Sovi Ismawati Rahayu Faculty of Economics and Business, YARSI University, Jakarta

DOI:

https://doi.org/10.58777/efi.v1i1.503

Keywords:

Leverage, Managerial Ownership, Financial Distress, Accounting Conservatism

Abstract

This study aims to explore the impact of leverage, managerial ownership, and financial distress on the decision to adopt accounting conservatism in manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the period from 2013 to 2017. Leverage is assessed through the Debt-to-Equity Ratio (DER), managerial ownership is evaluated using the managerial ownership ratio (MOR), financial distress is measured by the Altman Z-score, and accounting conservatism is indicated by CONACCit. This research utilizes a quantitative approach and a purposive sampling technique, resulting in a sample of 20 companies, relying on secondary data sourced from financial reports available on the official IDX website. Data analysis is conducted using multiple linear regression. The findings reveal that leverage, managerial ownership, and financial distress significantly affect accounting conservatism. The managerial implications of these results highlight the necessity for management to maintain a prudent capital structure, promote managerial ownership to enhance accountability, and adopt accounting conservatism as a strategy for addressing financial risks and preserving stakeholder trust. From an Islamic perspective, the implementation of accounting conservatism aligns with the principle of prudence, which is essential for maintaining trust, ensuring transparency, and safeguarding the interests of all stakeholders involved.

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