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This research aims to examine the influence of conservatism to the information asymmetry. It is conducted on non financial companies which were listed on BEI during 2007 to 2008. The accounting conservatism was measured in models such Givoly Hyan model (2000), Zhang model (2007), Kasznik model (1999), and market base model (Duellman, 2006). Whereas, asymmetrical accounting measured by CSPREAD (Kanagaretnam et al., 2007). Zhang has the higher r2(14.01%), and then Givoly (2000) 13 %, the others 11%. The research revealed that conservatism has significant and negative correlation to the information asymmetry. It supports Lafond and Watts (2006) which explained that conservatism has its role to reduce in information asymmetry. This result is expected to suggest that IFRS will never leave conservatism principles, because these principles have been proven to reduce asymmetry information between manager and investor.

Keywords: Conservatism, Information Asymmetry,Bid Ask Spread, Accrual Conservatism


Conservatism has become accepted accounting principles shared by many accountants since the 15th century and the increasingly popular use in the last three decades. No. FASB Statement of Concept. 2 defines conservatism as a reaction to be careful (prudent reaction) face of uncertainty. This is done to ensure that uncertainties and risks inherent in business situations has been sufficiently considered. There are pros and cons with respect to the application of the principle of conservatism.

Critics claimed that the conservatism of this principle resulted in financial reports to be biased and so can not be used as a tool for evaluating company risk. This opinion is supported by Monahan (1999) in Dwiputranto (2009) which states that the higher the conservatism of the reported book value will be more biased.

On the other hand, Ahmed et al. (2002) as a supporter of conservatism can be argued that conservatism reduces the conflict between bondholders, shareholders about the dividend policy. Dividend payments are too high to pose a threat to debt holders because it will reduce the assets that should be available for debt repayment. Overcome this problem, the usual action is to do with restrictions on dividend Based on company profits. That requires the presentation of earnings are conservative by limiting dividend payments are too high and the presentation of assets that are conservative to provide an overview to the debt holders of the availability of assets for debt payment.

Watts (2003) as a supporter of conservatism others argue that conservatism is the one characteristic that is very important in reducing agency costs and improve the quality of financial reporting information that will ultimately enhance the value of the company and its stock price. The shareholders have the expectation that management act on their interests. That requires such supervision and inspection of financial statements restrictions management decisions can be taken. The cost for supervision activities are referred to as agency costs. ….

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