The role of coperate governance, ethnicity and family ownership on earnings conservatism

Abstract

Corporate scandals around the world, resulting from the use of aggressive accounting practices has eroded investors’ confidence towards firm’s financial reports. This situation leads to lower quality of financial reporting and integrity of financial reports. It is widely believed that accounting conservatism practice can mitigate the problem by increasing the quality of financial reporting. Considering the importance of conservatism in financial reporting, this study addresses the issue of financial reporting in respect of accounting quality, as reflected in earnings conservatism. Specifically, this study examines the practice of earnings conservatism and the factors that affect the degree of accounting conservatism such as corporate governance mechanism, ethnicity and family ownership.