9. Summary and conclusion
The effect of CG on the level of accounting conservatism has been investigated in a number of studies (Beekes et al., 2004; Ahmed and Duellman, 2007; Chi et al., 2009; Ahmed and Henry, 2012; Elshandidy and Hassanein, 2014; Caskey and Laux, 2016; Kukah et al., 2016), but the results are inconclusive. In our study, four main hypotheses were examined.
First, a negative association was found between board size and accounting conservatism in Egyptian firms. These results support Chi et al. (2009), who reported that a large board size reduces the level of accounting conservatism. This implies that in cases of small board size (weak governance mechanism as in Egypt), companies tend to be conservative in their reporting to compensate for the weak governance structure.
H2 proposed a positive association between board independence and the extent of conservative accounting. This result is consistent with the recommendation of the Egyptian CG code that the majority of directors should be outside directors. They also agree with the findings of Beekes et al. (2004), Ahmed and Duellman (2007), Ahmed and Henry (2012) and Kukah et al. (2016). These findings imply that board independence as a CG mechanism plays a powerful role in enhancing the level of accounting conservatism in most countries.
