1- Research problem and questions:
The study problem is identified by asking the following questions:
A. A. What is the level of accounting conservatism in the published financial reports of the Egyptian businesses? What are the factors influencing it?
B. Does the ownership structure and characteristics of the Board of Directors affect the level of accounting conservatism in the published financial reports?
2- Research Objectives:
The main objective of the research is the study of the impact of each of the ownership structure and characteristics of the Board of Directors on the level of the accounting conservatism in the published financial reports of the Egyptian businesses. From this objective two sub-objectives arises:
A. Measurement of the level of accounting conservatism in the published financial reports for the listed Egyptian businesses in the stock exchange market and analyze the reasons for the contrast between them and the factors influencing it.
B. Examine the impact of all of the ownership structure and characteristics of the Board of Directors on the level of accounting consevatism, and establishing a model for the relationship between them so that it is an indication of the degree of accounting conservatism in the Egyptian businesses.
3- The Research importance:
The importance of research appears through the following:
A. The research is an extension of the accounting literature that focused on accounting conservatism in the published financial reports and recommended further studies on the analysis of the impact of each of the ownershipstructure and characteristics of the Board of Directors on the level of the accounting conservatism in the financial reporting of the Egyptian businesses in the light of the agency theory.
B. The research contributes in building 2 models to test the impact of each of the ownership structure and characteristics of the Board of Directors on the level of the theaccounting conservatism by introducing new variables to the models that have already been introduced by previous studies, reflecting new indicators which are significant in the interpretation of the relationship between both the ownership structureand the characteristics of the Board of Directors and the accounting conservatism.
C. Assess the level of accounting conservatism in the listed Egyptian companies in the stock exchange market provides a practical evidence to the need of the Egyptian environment to practice conservatism, especially after the collapse of many of the global companies whose practices presented a departure from the accounting conservatism requirements, as well as to show the factors influencing it and its impact on the benefits and appropriateness of accounting information in the published financial reports.
D. Analyzing the impact of the ownership structure and characteristics of the Board of Directors on the level of the accounting conservatism would enhance the understanding of the different stakeholders to the factors affecting the quality of the reports....
4- Research hypotheses:
The research hypotheses includetesting the impact of each of the variables related to the structure of ownership (administrative ownership, institutional ownership, ownership of large investors, family ownership, and the dispersion of property), as well as variables related to the characteristics of the Board of Directors (the size of the Board of Directors, the number of meetings, the independence of its members, and the separation between the head board of Directors and Managing Director) as independent variables on the accounting conservatism as a dependent variable.
5- Research Methodology:
The research methodology depends on the (Content Analysis analysis) methodto analayze the financial reports of the listed companies in the Egyptian Stock Exchange market during the period (2010 to 2012) in a Cross Sectional manner, the researcher relied on the survey method to identify a sample of auditors, faculty members and audit Committee members views in the determinants of accounting conservatism and its role in the interpretation of the variation in the level of conservatism of financial reporting in the business firms.
6- The research plan:
The Research is divided as follows Section I: General framework of the research, Section II: The relationship between the ownership structure and the characteristics of BOD and the level of accounting conservatism in thelight of the agency theory, Section III: previous studies and the development of research hypotheses, Section IV: research methodology and model building, Section V: the design of the Applied study, Section VI dealt with the analysis of the results of the applied study and hypotheses test, and Section VII: findings, recommendations and areas for future research.
7- Findings, recommendations and proposals for future
7.1 Results:
1. Low level of accounting conservatism in the Egyptian environment in general as it the highest proportion of the listed companies in the stock exchange market (46%) on (2012), which is an indication of the extent of the need for accounting policies conservative to achieve confidence in the information in the financial reporting especially after the revolution of 25thJanuary.
2. There are several determinants influencing the level of accounting conservatism in the financial reporting, including: (a difference ownership of businesses structure pattern with a mean (3.6276), and the difference in the board composition of a mean of 3.6244)), and the role contractual accounting information, and of (rewards management contracts, contracts and debt, taxes decades, and the political costs) with a mean 3.6071)).
3. ownership structure affects the pattern of institutional and specially the institutionalownership pattern with a significant effect on the level of the conservatism where the P.Value)) equal to (0.000) which is less than the significance level (0.05), while there was no significant effect of both managerial ownership, and ownership of big investors and family ownership where the value P.Valueis greater than the significant level (0.05).
4. The characteristics of the Board of Directors related to the independence of the members and the separation of the chairman and managing director has a significant effect on the level of the accounting conservatism in the financial reporting while there was no significant effect of the size of the Board of Directors and the number of meeting times.
5. there is a difference between economic sectors in the conservative policies practices as the highest average percentage of (MTP) in the information technologysector (2.706) sector, followed by basic resources sector (1.391), followed by distributors sector and retail trade (1.334), while the lowest percentage in the tourism and entertainment sector, The oil and gas sector, which refers to the lack of practice with the low accounting policies in a suitable manner.
6. There is a positiveerelationship with significance between both the size of the company, thedegree of financial, the quality of audit committees and the level of accounting conservatism in the financial reports while there is a positive relationship with no significance between each of the size of the Audit Office and the type of industry and the level of accounting conservatism.
7/2 Recommendations:
In light of the results that have been reached in both theoretical and applied study, the researcher recommends the following:
1. not to abandon the application of conservative accounting policies as its application makes the accounting information more relevant to decision-making and increases the value of the business, the exaggerated of their application may harm the company due to the shareholderbelief that he invests in less successful business, which makes him disposes his shares less than their value which means taking a decision not in his favor is so-called the problem of Inverse choice.
2. Amendment of the Board composition in the Egyptian businesses to include greater representation of the number of the outsider board members because of its role in increasing the regulatory and supervisory capacity of the board on management's performance and selection of accounting policies and the reduction of earnings management practices which is reflected on the level of the accounting conservatism in the financial reports.
3. Limiting on the ratios of different forms of ownership in the Egyptian businesses and commitment to disclose in order to achieve the protection of various stakeholders associated with the business and limiting the paragmaticbehavior of management in the selection of accounting policies and affecting the level of the accounting conservatism practices.
4. Redeveloping the Egyptian Accounting Standards so as to allow the development of binding limits for businesses to apply conservative accounting practice, as well as the need to include auditing standards that benefit the disclosure of the auditor in his report on the conservatism over the financial statements of the entity.
5. Doing further Accounting Research, which provides further explanation of the level of accounting conservatism in the financial reports in the environment of Egyptian business, with the importance of the use of other forms of measurement, such as (Basu, 1997)model, which offers several possible explanations for the conservatism and (Feltham and Ohlson, 1995model).
7/3 Future proposals:
The Researcher finds in the light of what has been reached from the results that there are many areas that can serve as a basis for future research, including the following:
1. Examine the relationship between external audit procedures and the degree of exercising of the accounting conservatism in the financial reporting.
2. Study the impact of the quality of audit committeescharacteristics in improving the level of accounting conservatism in the financial reporting.
3. Examine the relationship between the accounting conservatism and social performance of the businesses (Corporate Social Performance).
4. Examine the relationship between administrative overconfidence (Managerial Overconfidence) and the accounting conservatism.
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