Accounting conservatism and corporate governance: evidence from India

Abstract

Purpose

The paper aims to study the impact of corporate governance variables on the adoption of accounting conservatism by S&P BSE 500 index firms.

Design/methodology/approach

The period for the study is from 2010–2018. The data has been extracted from the BSE website, annual reports of the sample companies and the Prowess IQ database. Panel data methodology has been used to analyse the impact of the corporate governance variables on accounting conservatism. Accounting conservatism is the dependent variable, which has been measured by using the CONACCR (negative accruals) measure and the independent variables include the characteristics of the board of directors and the audit committee.

Findings

Overall, the relationship between accounting conservatism and corporate governance indicates a significant impact of corporate governance variables, namely, characteristics of the board of directors and the audit committee, on the accounting conservatism policy of the firm.

Originality/value

This research explores the benefits of conservatism in resolving agency conflict. Very few studies have captured the relationship of individual components of corporate governance with accounting conservatism. Moreover, this study contributes to the literature regarding the influence of corporate governance variables on the extent of conservatism used in accounting records.

Citation

Sharma, M. and Kaur, R. (2021), "Accounting conservatism and corporate governance: evidence from India", Journal of Global Responsibility, Vol. 12 No. 4, pp. 435-451. https://doi.org/10.1108/JGR-07-2020-0072