Track: Data Analytics

Abstract

This study aims to identify the factors that affect the decision to apply accounting conservatism. The factors used are profitability, investment opportunity set, and debt covenant. The main goal of this study is to determine whether the level of profitability, investment opportunity set, and debt covenant affect management's decision to apply a conservative principle in the accounting method. The objects of this study are the consumer goods companies listed on the Indonesian Stock Exchange, with an observation period of 3 years, ranging from 2014 to 2016. This study concluded that profitability, investment opportunity set, and debt covenant simultaneously affect accounting conservatism. The variable profitability has a significant positive effect on accounting conservatism, while variables investment opportunity set, and debt covenant has no significant effect on accounting conservatism.