International Journal of Accounting and Taxation

Corporate Governance and Conditional Accounting Conservatism in Nigeria Listed Food and Beverages Firms
Salami Suleiman, Mutalib.Anifowose

Abstract
The role of conservatism in accounting has been a subject of controversy and the explanations for its existence have important implications especially for accounting regulators. This study examines the effects of corporate governance on conditional accounting conservatism in the Nigeria food and beverages sector. Data for the study was obtained from the Nigerian Stock Exchange Fact Book and the companies’ annual report for the period 2003 to 2010. This study developed a composite measure of corporate governance consisting of five internal governance proxies (CEO/Chairmanship separation, board size, board composition, directors’ shareholding and presence of an audit committee). Conditional accounting conservatism is measured using the augmented asymmetric accrual to cash flow measure (AACF). The extent of the influence was estimated using regression method of analysis. Controlling for leverage, firm size and sales growth and profitability, our results shows that the asymmetric incorporation of bad news into earnings is significantly faster (timelier) than the incorporation of good news in firms with good governance. Thus, our evidence is consistent with firms having sound governance utilizing conservatism as a governance mechanism. We conclude that firms having sound governance significantly improve implementation of conservative reporting. Therefore, the Securities and Exchange Commission and Corporate Affairs Commission should not relent in ensuring best governance practices by the boards of Nigeria listed food and beverages firms to continually improve realization of accounting numbers.

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