The Relationship between Accounting Conservatism & Corporate Governance

This study examines the relationship between corporate governance mechanisms and accounting conservatism in listed companies of Tehran Stock Exchange. In this study, In order to examine the relationship between conservatism and corporate governance, the ownership percentage of institutional shareholders, the percentage of independent directors, separation of duties of CEO and the chairman of the board of directors, and the existence of the internal auditor at companies as corporate governance mechanisms and the methods (giovly and Hayn), and (Ball and Shivakumar) as conservatism model have been used in 71 firms which listed in Tehran Stock Exchange from 2004-2009. Our findings indicate this is a limitation due to low sample size and the requirement to model Ball and Shivakumar large number of observations and during the long period of time, in terms of the said model were not statistically significant and take advantage of this method in Iran currently not possible. Furthermore, our examination shows that there is a positive relationship between the ownership percentage of institutional shareholders and percentage of independent directors and a negative association between separation of duties with CEO and the chairman of the board of directors with the giovly and Hayn model of conservation. We did not observe a significant relationship between the level of conservation and the existence of internal auditor in firms in Tehran Stock Exchange. Our results provide support for complementary approach regarding conservatism and the corporate governance mechanisms.