Last modified: 2019-06-22
Abstract
ABSTRACT
Research aims: This research aims to empirically examine the effects of public debt ownership and state ownership on the level of corporate conservatism. More specifically, this study will examine whether: (1) the level of conservatism of companies that have public debt will be higher than companies that only have private debt; (2) the conservatism of state-owned enterprise (SOE) will be lower than non-SOE companies; and (3) SOE conservatism that has public debt will be higher than SOEs that do not have public debt.
Methodology: Testing is done using two ways, namely market price based testing and accrual based testing. Both of these methods are used to mitigate the bias of results due to the inefficient nature of the market.
Research findings: The test results show that accrual-based measurements are better at explaining conservatism in Indonesia. Accrual-based test results show that: (1) the conservatism of companies that have public debt (bonds) is higher than companies that only have private debt; (2) SOE conservatism is lower than non-SOE; and (3) SOE that has public debt has lower conservatism than SOEs that do not have public debt.
Practical implications : The low level of SOE conservatism is allegedly due to the assumption that there is protection from the government, weak public demand for BUMN conservatism, and the absence of regulations that encourage the practice of high conservatism.
Theoretical implications : This study shows evidence that in an inefficient market, conservatism testing must use accrual-based testing. The test results also show evidence that there are differences in the level of conservatism between companies that have public debt (bonds) and companies that only have private debt (banks). Companies that have bonds are proven to have a higher level of conservatism. Finally, this study also shows evidence that the existence of state ownership will reduce the level of corporate conservatism.
Keywords: conservatism, debt, and SOEReferences
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