Conservative Accounting and State Ownership: Estimation Model of Conservatism in Indonesian State-Owned Enterprises

Lita Dharmayuni(1*), Denok Sunarsi(2), Asmar Asmar(3), Aris Baharuddin(4),

(1) STIE YAI Jakarta, Indonesia.
(2) Pamulang University, South Tangerang, Banten, Indonesia
(3) Universitas Negeri Makassar, Makassar, Indonesia.
(4) Universitas Negeri Makassar, Makassar, Indonesia.
(*) Corresponding Author



BUMN is considered vital to the national economy, contributing directly to GDP, employment, and market expansion. The contribution of BUMN to State Budget and Expenditure (APBN) revenues in 2018 reached IDR 422 trillion. BUMN companies also control 25% of the capital market capitalization value in Indonesia. BUMN is not much different from other private and public companies; therefore, BUMN is also inseparable from agency conflict. Previous research has shown an inverse effect of government ownership on accounting conservatism and a significant positive relationship between foreign and institutional ownership. The results show that the income level is ‘not persistent’ because the increase has a ‘momentum’ of 43%, which increases in the following year. The results also show that the timely recognition of economic gain (gain) as a component of income is repeating transitory component of income and that the recognition of profits is much more timely than recognition of losses indicates that most of the components of temporary gain from income are not classified by the companies studied. as exceptional or extraordinary.


Full Text:



Abd-Elnaby, Hala. 2019. The Effect of Accounting Conservatism on Investment Efficiency and Debt Financing: Evidence From Egyptian Listed Companies. International Journal of Accounting and Financial Reporting. 2019, Vol. 9, No. 2. ISSN 2162-3082.

Alkurdi, A., Al-Nimer, M., & Dabaghia, M. 2017. Accounting Conservatism and Ownership Structure Effect: Evidence from Industrial and Financial Jordanian Listed Company. International Journal of Economics and Financial Issues. 7(2). 608-619.

Ang, James S., and David K. Ding. 2006. Government Ownership and the Performance of Government-Linked Companies: The Case of Singapore. Journal of Multinational Financial Management 16 (1): 64-88

Ball, R., A. Robin, and J. S. Wu. 2003. Incentives versus standards: properties of accounting income in four East Asian countries. Journal of Accounting & Economics 36 (1-3):235-270.

Ball, R. and L. Shivakumar. 2005. Earnings Quality in UK Private Firms: Comparative Loss Recognition Timeliness, Journal of Accounting and Economics 39, 83-128.

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

Beaver, W.H & Ryan, S. G. 2005. Conditional and Unconditional Conservatism: Concepts and Modeling. Review of Accounting Studies, 10, 269–309.

Bigelli, M., Ugedo, F. M and Vidal, F. J S. 2014. Financial conservatism of private firms. Journal of Business Research 67 (2014) 2419–2427

Bozec, Rirchard, G. Breton, and L. Côté. 2002. The Performance of State-Owned Enterprises Revisited. Financial Accountability & Management 18 (4): 383- 407.

Bushman, R. M., J. D. Piotroski, and A. J. Smith. 2004. What Determines Corporate Transparency? Journal of Accounting Research 42 (2):207-252.

Callen, J. L., Chen, F., Dou, Y., & Xin, B. 2015. Accounting Conservatism and Performance Covenant: A Signaling Approach. Contemporary Accounting Research, 33(3), 961-988.

Chen, H, Chen, J. Z, Lobo. G. J & Wang. Y. 2010. Association Between Borrower and Lender State Ownership and Accounting Conservatism. Journal of Accounting Research Vol. 48 No. 5 December 2010.

Chen, Shimin, Zheng Sun, Song Tang, and Donghui Wu. 2011. Government Intervention and Investment Efficiency: Evidence from China. Journal of Corporate Finance 17 (2): 259-271

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. 1–16.

Dewenter, Kathryn L., and Paul H. Malatesta. 2001. State-Owned and Privately Owned Firms: An Empirical Analysis of Profitability, Leverage, and Labor Intensity. American Economic Review 91 (1):320-334.

Delkhosh, M., Yakhdani, Z., & Yadkhdani, Z. 2017. The Impact of Conservatism on the Earning Quality Based on Moderating Role of Earning: Evidence from Tehran Stock Exchange (TSE). International Journal of Economic Perspective. Volume 11, Issue 4, 351-362.

Feng, Fang, Qian Sun, and Wilson H. S. Tong. 2004. Do Government-Linked Companies Underperform?, Journal of Banking & Finance 28 (10): 2461- 2492.

Gumilar, I., & Sunarsi, D. (2020). Comparison of financial performance in banking with high car and low car (Study of banks approved in the kompas 100 index for the period 2013-2017). International Journal of Psychosocial Rehabilitation, 24(7).

Jiang, Fuxiu, Jicheng Huang, and Kenneth A. Kim. 2013. Appointments of Outsiders as CEOs, State-Owned Enterprises, and Firm Performance: Evidence from China. Pacific-Basin Finance Journal 23 (0): 49-64

Khan, M., R. L. Watts. 2009. Estimation and Empirical Properties of a Firm-year Measure of Accounting Conservatism, Journal of Accounting and Economics 48, 132-150.

Puspasari. Rahayu. 2014. Performance of State-Owned Enterprises in Indonesia: The Impact of Government Involvement. School of Business, Curtin University.

Ramalingegowda, S., & Yu, Yong. 2009. Institutional ownership and conservatism. Journal of Accounting and Economics 53 (2012) 98–114.

Roychowdhury, S. & Watts, Ross. L. 2007. Asymmetric timeliness of earnings, market-to-book, and conservatism in financial reporting. Journal of Accounting and Economics 44 (2007) 2–31

Song, Fangfang. 2015. Ownership Structure and Accounting Conservatism: A Literature Review. Modern Economy, 2015, 6, 478-483.

Stephen G. Ryan. 2006. Identifying Conditional Conservatism, European Accounting Review, 15:4, 511-525.

Sturdivant, F. D., Ginter, J. L & Sawyer, A. G. 1985. Managers’ conservatism and corporate performance. Strategic Management Journal. Volume 6, Issue 1. January/March 1985. 17-38.

Sudarwan, M & Fogarty, T.J. 1996. Culture and Accounting in Indonesia: An Empirical Examination. The International Journal of Accounting Vol.31 No 4. pp 463-481

Sun, Qian, Wilson H. S. Tong, and Jing Tong. 2002. How Does Government Ownership Affect Firm Performance? Evidence from China‟s Privatization Experience. Journal of Business Finance & Accounting 29 (1-2): 1-27.

Sun, Y. & Xu, W. 2012. The role of accounting conservatism in management forecast bias. Journal of Contemporary Accounting & Economics 8 (2012) 64–77.

Lara, J.M.G, B.G. Osma, and F. Penalva. 2016. Accounting conservatism and firm investment efficiency, Journal of Accounting and Economics 61, 221-238.

Li, Shaomin, and Jun Xia. 2007. The Roles and Performance of State Firms and Non-State Firms in China‟s Economic Transition. World Development 36 (1): 39-54.

Loyola, G & Portilla, Y. 2020. Managerial compensation as a double-edged sword: Optimal incentives under misreporting. International Review of Economics and Finance.

Maslen, S & Hopkins, A. 2014. Do incentives work? A qualitative study of managers’ motivations in hazardous industries. Safety Science 70 (2014) 419–428

Morek, Randall clan Bernard Yeung, 2004, Family control and the rent-seeking society, Entrepreneurship Theory and Practice (28): 391-409.

Nawang. D & Selahudin. N. F. 2015. Accounting Conservatism In Government-Linked Companies: A Conservatism Estimating Model, Journal of Education and Social Sciences, Vol. 2, (Oct.) ISSN 2289-9855.

Neag. R & Maca. 2015. Identifying Accounting Conservatism – a Literature Review. Procedia Economics and Finance 32 (2015) 1114 – 1121.

Wan Ismail. W. A, Kamarudin. K. A & Othman. R. 2012. Assessment of Earnings Conservatism in Government-Linked Companies. Procedia - Social and Behavioral Sciences 65 (2012) 650 – 655.

Watts, R. L., 2003a, Conservatism in Accounting Part I: Explanation and Implications, Accounting Horizons 17, 207-221.

Watts, R. L., 2003b, Conservatism in Accounting Part II: Evidence and Research Opportunities, Accounting Horizons 17, 287-301.

Yun, Ren. 2014. Corporate governance, conservatism and firm performance: Evidence from China. School of Business Faculty of Business and Law Edith Cowan University, Perth Western Australia.

Yunos, R, M., Smith, M., & Ismial, Z. 2010. Accounting Conservatism And Ownership Concentration: Evidence From Malaysia. Journal of Business and Policy Research Volume 5. Number 2. December 2010 Pp. 1 – 15.

Article Metrics

Abstract view : 173 times | PDF view : 29 times


  • There are currently no refbacks.

Copyright (c) 2020 Lita Dharmayuni, Denok Sunarsi, Asmar Asmar, Aris Baharuddin