Firm Size and Accounting Conservatism in Indonesia’s Largest Listed Banks: The Mediating Role of Board of Commissioners Size
Keywords:
firm size, accounting conservatism, board of commissioners, corporate governance, Indonesian bankingAbstract
This study examines whether firm size is associated with accounting conservatism directly and indirectly through the size of the board of commissioners in large Indonesian listed banks. The study uses 75 bank-year observations from 15 large banks listed on the Indonesia Stock Exchange during 2020–2024. Firm size is measured as the natural logarithm of total assets, board structure is measured by the number of commissioners, and accounting conservatism is proxied by the market-to-book ratio as a cumulative net-asset measure. Path analysis shows that firm size is positively associated with board size (B = 0.390; β = 0.446; p < 0.001) and accounting conservatism (B = 0.548; β = 0.578; p < 0.001), whereas board size is negatively associated with accounting conservatism (B = −0.406; β = −0.374; p = 0.001). The indirect effect is negative and significant (ab = −0.158; Sobel z = −2.642; p = 0.008), indicating competitive mediation: larger banks exhibit greater conservatism directly, but the expansion of board size partially offsets that relationship. The findings support the political cost explanation for the direct firm-size effect while showing that board size should not be interpreted as equivalent to governance quality. The study contributes evidence from a highly regulated banking setting and highlights the need to distinguish governance structure from governance effectiveness when explaining conservative financial reporting.
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