Corporate Governance Mechanisms and Accounting Conservatism: Evidence from Pakistan

  • Muhammad Bilal Saeed et al., 1PhD Scholar, Capital University of Science and Technology, Islamabad, Pakistan
Keywords: Accounting Conservatism, Corporate Governance, CEO Turnover, Gender Diversity on Board


This study examines the impact of corporate governance mechanisms on accounting conservatism in Pakistan. A sample of 100 firms is drawn from non-financial companies listed on Pakistan Stock Exchange from 2009 to 2015. Corporate governance mechanisms often pave the way for the expropriation of minority shareholders at the hands of controlling shareholders and also support to hide their professional misconduct via conservative accounting reports. Multivariate panel data regression analysis is employed as the estimation procedure. The results show that some corporate governance mechanisms are related to accounting conservatism. This study reports an empirical evidence of a positive association between institutional shareholding and accounting conservatism as well as the negative association between board size, CEO duality, managerial ownership and accounting conservatism in case of listed firms in Pakistan. However, some corporate governance attributes that were not previously examined in Pakistan like CEO turnover, and gender diversity on board is found to have no significant impact on accounting conservatism. The results suggest that users of financial statements should consider the corporate governance mechanisms while evaluating non-financial listed in a country like Pakistan where corporate governance is undergoing an evolutionary process and numerous family-controlled firms exist.