Board of Director Characteristics, Institutional Ownership, and Accounting Conservatism

Ni Wayan Rustiarini, Agus Wahyudi Salasa Gama, Desak Nyoman Sri Werastuti


One of the determinants of conservatism is the characteristics of the board of directors. Several studies have examined the relationship between board characteristics and accounting conservatism. Nonetheless, previous empirical findings show heterogeneous and inconclusive results. This study aims to prove the role of board characteristics, namely board size, board female, and board overconfidence, in accounting conservatism. This study also explores the role of institutional ownership in moderating the board characteristic relationship and accounting conservatism. This research was conducted on 123 manufacturing companies for three observation periods, namely 2017-2019. The sampling method used purposive sampling. The data analysis technique used is Partial Least Square. The test results prove that board size and board female increase accounting conservatism, while board overconfidence reduces conservatism. The study results also indicate that institutional ownership can strengthen the relationship between board size and board female to accounting conservatism. Contrary, institutional ownership failed to moderate the relationship between board overconfidence and accounting conservatism.


Accounting Conservatism, Board of Directors, Institutional Ownership

Full Text:



Abdul-Manaf, K. B., Amran, N. A., & Zainol-Abidin, A. (2014). Board size and accounting conservatism of Malaysian listed firms. Australian Journal of Basic and Applied Sciences, 8(23), 207–211. Retrieved from

Affes, H., & Sardouk, H. (2016). Accounting conservatism and corporate performance: The moderating effect of the board of directors. Journal of Business and Financial Affairs, 5(2), 1–8.

Ahmed, A. S., Billings, B. K., Morton, R. M., & Stanford‐Harris, M. (2002). The role of accounting conservatism in mitigating bondholder‐shareholder conflicts over dividend policy and in reducing debt costs. The Accounting Review, 77(4), 867–890.

Ahmed, A. S., & Duellman, S. (2007). Accounting conservatism and board of director characteristics: An empirical analysis. Journal of Accounting and Economics, 43(2), 411–437.

Ahmed, A. S., & Duellman, S. (2013). Managerial overconfidence and accounting conservatism. Journal of Accounting Research, 51(1), 1–30.

Ahmed, K., & Henry, D. (2012). Accounting conservatism and voluntary corporate governance mechanisms by Australian firms. Accounting & Finance, 52(3), 631–662.

Alkurdi, A., Al-Nimer, M., & Dabaghia, M. (2017). Accounting conservatism and ownership structure effect: Evidence from industrial and financial Jordanian listed companies. International Journal of Economics and Financial Issues, 7(2), 608–619. Retrieved from Conservatism and Ownership Structure Effect Evidence from Industrial and Financial Jordanian Listed.pdf

Almutairi, A. R., & Quttainah, M. A. (2019). Corporate governance and accounting conservatism in Islamic banks. Thunderbird International Business Review, 61(5), 745–764.

Anderson, R. C., Mansi, S. A., & Reeb, D. M. (2004). Board characteristics, accounting report integrity, and the cost of debt. Journal of Accounting and Economics, 37(3), 315–342.

Baker, M., Ruback, R. S., & Wurgler, J. (2007). Behavioral Corporate Finance. In Handbooks in Finance (pp. 145–186). San Diego: Elsevier.

Barber, B. M., & Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. The Quarterly Journal of Economics, 116(1), 261–292.

Basu, S. (1997). The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting and Economics, 24(1), 3–37.

Ben-David, I., Graham, J. R., & Harvey, C. R. (2013). Managerial miscalibration. The Quarterly Journal of Economics, 128(4), 1547–1584.

Boussaid, N., Hamza, T., & Sougne, D. (2015). Corporate board attributes and conditional accounting conservatism: Evidence from French firms. Journal of Applied Business Research (JABR), 31(3), 871–890.

Chi, W., Liu, C., & Wang, T. (2009). What affects accounting conservatism: A corporate governance perspective. Journal of Contemporary Accounting & Economics, 5(1), 47–59.

Chouaibi, J., & Chiekh, S. (2017). Effects of the specific characteristics of the CEO on accounting conservatism: A study in the US context. International Journal of Auditing Technology, 3(4), 297–317.

Coles, J. L., Daniel, N. D., & Naveen, L. (2008). Boards: Does one size fit all? Journal of Financial Economics, 87(2), 329–356.

Cullinan, C. P., Wang, F., Wang, P., & Zhang, J. (2012). Ownership structure and accounting conservatism in China. Journal of International Accounting, Auditing, and Taxation, 21(1), 1–16.

Darrat, A. F., Gray, S., Park, J. C., & Wu, Y. (2014). Corporate governance and bankruptcy risk. Journal of Accounting, Auditing & Finance, 31(2), 163–202.

Deshmukh, S., Goel, A. M., & Howe, K. M. (2013). CEO overconfidence and dividend policy. Journal of Financial Intermediation, 22(3), 440–463.

Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2010). The effects of executives on corporate tax avoidance. The Accounting Review, 85(4), 1163–1189.

Ebrahim, A., & Fattah, T. A. (2015). Corporate governance and initial compliance with IFRS in emerging markets: The case of income tax accounting in Egypt. Journal of International Accounting, Auditing and Taxation, 24(1), 46–60.

Eisenberg, T., Sundgren, S., & Wells, M. T. (1998). Larger board size and decreasing firm value in small firms. Journal of Financial Economics, 48(1), 35–54.

El-habashy, H. A. (2019). The effect of corporate governance attributes on accounting conservatism in Egypt. Academy of Accounting and Financial Studies Journal, 23(3), 1–18.

Elshandidy, T., & Hassanein, A. (2014). Do IFRS and board of directors’ independence affect accounting conservatism? Applied Financial Economics, 24(16), 1091–1102.

Enache, L., & García-Meca, E. (2019). Board composition and accounting conservatism: The role of business experts, support specialist, and community influentials. Australian Accounting Review, 29(1), 252–265.

Farooq, O., & El Jai, H. (2012). Ownership structure and earnings management: Evidence from the Casablanca stock exchange. International Research Journal of Finance and Economics, 84(1), 95–105. Retrieved from

Firth, M., Gao, J., Shen, J., & Zhang, Y. (2016). Institutional stock ownership and firms’ cash dividend policies: Evidence from China. Journal of Banking & Finance, 65(4), 91–107.

Forbes, D. P., & Milliken, F. J. (1999). Cognition and corporate governance: Understanding boards of directors as strategic decision-making groups. Academy of Management Review, 24(3), 489–505.

Francis, B., Hasan, I., Park, J. C., & Wu, Q. (2015). Gender differences in financial reporting decision making: Evidence from accounting conservatism. Contemporary Accounting Research, 32(3), 1285–1318.

Francis, B., Hasan, I., & Wu, Q. (2013). The benefits of conservative accounting to shareholders: Evidence from the financial crisis. Accounting Horizons, 27(2), 319–346.

Galasso, A., & Simcoe, T. S. (2011). CEO overconfidence and innovation. Management Science, 57(8), 1469–1484.

García Lara, J. M., García Osma, B., & Penalva, F. (2009). Accounting conservatism and corporate governance. Review of Accounting Studies, 14(1), 161–201.

Ge, W., Matsumoto, D., & Zhang, J. L. (2011). Do CFOs have style? An empirical investigation of the effect of individual CFOs on accounting practices*. Contemporary Accounting Research, 28(4), 1141–1179.

Givoly, D., & Hayn, C. (2000). The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative? Journal of Accounting and Economics, 29(3), 287–320.

Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1), 3–73.

Gul, F. A., Srinidhi, B., & Ng, A. C. (2011). Does board gender diversity improve the informativeness of stock prices? Journal of Accounting and Economics, 51(3), 314–338.

Habib, A., & Hossain, M. (2013). CEO/CFO characteristics and financial reporting quality: A review. Research in Accounting Regulation, 25(1), 88–100.

Heaton, J. B. (2002). Managerial optimism and corporate finance. Financial Management, 31(2), 33–45.

Hendro, H., & Wardhani, R. (2015). Pengaruh agency cost of free cash flow terhadap tingkat konservatisme dan pengujian efek moderasi kebijakan hutang, pendistribusian kas, persistensi kas, dan tata kelola perusahaan. Jurnal Akuntansi Dan Keuangan, 17(1), 41–56.

Hilary, G., & Hsu, C. (2011). Endogenous overconfidence in managerial forecasts. Journal of Accounting and Economics, 51(3), 300–313.

Hirshleifer, D., Low, A., & Teoh, S. H. (2012). Are overconfident CEOs better innovators? The Journal of Finance, 67(4), 1457–1498.

Ho, S. S. M., Li, A. Y., Tam, K., & Zhang, F. (2015). CEO gender, ethical leadership, and accounting conservatism. Journal of Business Ethics, 127(2), 351–370.

Hsu, C., Novoselov, K. E., & Wang, R. (2017). Does accounting conservatism mitigate the shortcomings of CEO overconfidence? The Accounting Review, 92(6), 77–101.

Huang, J., & Kisgen, D. J. (2013). Gender and corporate finance: Are male executives overconfident relative to female executives? Journal of Financial Economics, 108(3), 822–839.

Hwang, K., Cha, M., & Yeo, Y. (2015). Does managerial overconfidence influence on financial reporting? The relationship between overinvestment and conditional conservatism. Review of Integrative Business and Economics Research, 4(1), 273. Retrieved from

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(4), 305–360.

Juliani, D., & Wardhani, R. (2018). Pengaruh konservatisme terhadap efisiensi investasi dan agency cost sebagai variabel moderasi pada perusahaan yang melakukan merger dan akuisisi di Asia Tenggara. Jurnal Akuntansi, 22(2), 266–278.

Kiel, G. C., & Nicholson, G. J. (2003). Board composition and corporate performance: How the Australian experience informs contrasting theories of corporate governance. Corporate Governance: An International Review, 11(3), 189–205.

Kouaib, A., & Jarboui, A. (2016). The moderating effect of CEO profile on the link between cutting R&D expenditures and targeting to meet/beat earnings benchmarks. The Journal of High Technology Management Research, 27(2), 140–160.

Krishnan, G. V, & Parsons, L. M. (2008). Getting to the bottom line: An exploration of gender and earnings quality. Journal of Business Ethics, 78(1), 65–76.

Labelle, R., Makni Gargouri, R., & Francoeur, C. (2010). Ethics, diversity management, and financial reporting quality. Journal of Business Ethics, 93(2), 335–353.

Levi, M. D., Li, K., & Zhang, F. (2008). Mergers and acquisitions: The role of gender. Retrieved January 1, 2021, from

Libby, R., & Rennekamp, K. (2012). Self-serving attribution bias, overconfidence, and the issuance of management forecasts. Journal of Accounting Research, 50(1), 197–231.

Lim, R. (2011). Are corporate governance attributes associated with accounting conservatism? Accounting & Finance, 51(4), 1007–1030.

Lin, F., Wu, C.-M., Fang, T.-Y., & Wun, J.-C. (2014). The relations among accounting conservatism, institutional investors, and earnings manipulation. Economic Modelling, 37(2), 164–174.

Lin, L. (2016). Institutional ownership composition and accounting conservatism. Review of Quantitative Finance and Accounting, 46(2), 359–385.

Majeed, M. A., Xian-zhi Zhang, & Wang, Z. (2017). Product market competition, regulatory changes, ownership structure, and accounting conservatism: Evidence from China. Chinese Management Studies, 11(4), 658–688.

Malmendier, U., & Tate, G. (2015). Behavioral CEOs: The role of managerial overconfidence. Journal of Economic Perspectives, 29(4), 37–60.

Martin, A. D., Nishikawa, T., & Williams, M. A. (2009). CEO gender: Effects on valuation and risk. Quarterly Journal of Finance and Accounting, 48(3), 23–40. Retrieved from

Mohammed, N. F., Ahmed, K., & Ji, X.-D. (2017). Accounting conservatism, corporate governance, and political connections. Asian Review of Accounting, 25(2), 288–318.

Muttakin, M. B., Khan, A., & Tanewski, G. (2019). CFO tenure, CFO board membership, and accounting conservatism. Journal of Contemporary Accounting & Economics, 15(3), 100165.

Nasr, M. A., & Ntim, C. G. (2018). Corporate governance mechanisms and accounting conservatism: Evidence from Egypt. Corporate Governance: The International Journal of Business in Society, 18(3), 386–407.

Peni, E., & Vähämaa, S. (2010). Female executives and earnings management. Managerial Finance, 36(7), 629–645.

Pikulina, E., Renneboog, L., & Tobler, P. N. (2017). Overconfidence and investment: An experimental approach. Journal of Corporate Finance, 43(4), 175–192.

Platt, H., & Platt, M. (2012). Corporate board attributes and bankruptcy. Journal of Business Research, 65(8), 1139–1143.

Powell, M., & Ansic, D. (1997). Gender differences in risk behaviour in financial decision-making: An experimental analysis. Journal of Economic Psychology, 18(6), 605–628.

Ramalingegowda, S., & Yu, Y. (2012). Institutional ownership and conservatism. Journal of Accounting and Economics, 53(1), 98–114.

Ramsheh, M., & Molanzari, M. (2014). Managerial overconfidence and accounting conservatism. Journal of Accounting of Knowledge, 5(16), 55–79.

Reyad, S. M. R. (2012). Accounting conservatism and auditing quality: An applied study on Egyptian corporations. European Journal of Business and Management, 4(21), 108–117.

Roll, R. (1986). The hubris hypothesis of corporate takeovers. The Journal of Business, 59(2), 197–216. Retrieved from

Savitri, E. (2016). Konservatisme Akuntansi: Cara Pengukuran, Tinjauan Empiris, dan Faktor-faktor yang Mempengaruhinya (First). Yogyakarta: Pustaka Sahila.

Schrand, C. M., & Zechman, S. L. C. (2012). Executive overconfidence and the slippery slope to financial misreporting. Journal of Accounting and Economics, 53(1), 311–329.

Song, F. (2015). Ownership structure and accounting conservatism: A literature review. Modern Economy, 6(04), 478.

Stephenson, C., & Nt, M. (2004). Leveraging diversity to maximum advantage: The business case for appointing more women to boards. Ivey Business Journal, 69(1), 1–5. Retrieved from

Suleiman, S. (2014). Corporate governance mechanisms and accounting conservatism. Journal of Management Policies and Practices, 2(2), 113–127. Retrieved from

Sutrisno, P. (2020). Are CEO overconfidence and audit firm size related to tax avoidance? GATR Accounting and Finance Review, 5(2), 56–65.

Sutrisno, P., & Karmudiandri, A. (2020). CEO overconfidence, founder restatement of financial reporting. International Journal of Business, Economics and Law, 23(1), 192–198.

Tang, Y., Li, J., & Yang, H. (2015). What I see, what I do: How executive hubris affects firm innovation. Journal of Management, 41(6), 1698–1723.

Vermeir, I., & Van Kenhove, P. (2008). Gender differences in double standards. Journal of Business Ethics, 81(2), 281–295.

Watts, R. L. (2003). Conservatism in accounting part I: Explanations and implications. Accounting Horizons, 17(3), 207–221.

Wei, J., Min, X., & Jiaxing, Y. (2011). Managerial overconfidence and debt maturity structure of firms. China Finance Review International, 1(3), 262–279.

Widhiastuti, R., Kiswanto, K., & Jati, K. W. (2020). The role of women’s leadership in manufacturing companies listed on the Indonesia Stock Exchange. The Indonesian Journal of Accounting Research, 23(1), 49–66.

Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40(2), 185–211.

Zeng, S., & Wang, L. (2015). CEO gender and corporate cash holdings: Are female CEOs more conservative? Asia-Pacific Journal of Accounting & Economics, 22(4), 449–474.



  • There are currently no refbacks.


The Indonesian Journal of Accounting Research (IJAR)

Editorial Secretariat

Master of Science and Doctoral Programs
Faculty of Economics and Business, Gadjah Mada University

Jl. Nusantara, Bulaksumur Yogyakarta 55281
CP : Novita
Phone  : +62 812-2848-2829
Fax    : +62 274 524606
Email  :

Marketing and Sales Office

Ikatan Akuntan Indonesia
Graha Akuntan, Jl. Sindanglaya No.1 Menteng, Jakarta Pusat 10310
CP : Reza Fauzi
Divisi Pelayanan, Keanggotaan dan Mitra IAI.
Grha Akuntan, Jl. Sindanglaya No.1, Menteng.
Telp.021-31904232 Ext.324/321



ISSN 2086-6887 (Print)
ISSN 2655 - 1748 (online)


Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.