Empirical result of the Conservatism Impact on Value Relevance of Accounting Information

3. Empirical result of the Conservatism Impact on Value Relevance of Accounting Information

Classical assumption test shows there is a heteroscedasticity problem and the data is not normal. Because of using 840 observations, it is assumed to be normal distribution (Gujarati, 2003). Attempts to solve the problem of heteroscedasticity has been done but was not successful.

Regression equation of conservatism impact on the value relevance of accounting information is below. HSu it = 71,318+ 0,490NBEn it + 3,815EPS it + 161,975DAKOT it - 0,303ALOPS it

+ 0,222INV it + 146,566DATW it + 0,363Cn it + 0,001Cn it *NBEn it – 0,001Cn it *EPS it + 1,124Cn it *DAKOT it – 0,001Cn it *ALOPS it - 0,001Cn it *INV it - 0,590Cn it *DATW it …………………………………(7)

R 2 (Adj.) = 0,858 (0,855)

It shows that F value is 382.874 with a probability value is 0.000, significant at 1 percent. Value of R 2 (adj.) shows that the variation can be explained by the 13

company's independent variables are 85.5 percent, the rest of it is explained by other variables not included in the model.

3.1. Hypothesis 7. The hypothesis seven states accounting conservatism strengthen the value relevance of equity (Cn*NBEn). Statistical test result shows the value of t is 2.047, a probability is 0.041 and the coefficient is positive, so that Ho 7 successfully rejected. In a conservative condition, investors pay more attention to equity in assessing stock prices (Barth et al., 1998; Collins et al., 1999).

3.2. Hypothesis 8. Hypothesis eight states accounting conservatism weaken the value relevance of corporate performance (Cn*EPS). Statistical test result shows that t is -4.329, the probability is 0.000 and the coefficient is negative, then Ho 8 successfully rejected. This result confirms the statement of Watts (2003a) and the findings of Barth et al., (1998), Collins et al., (1999), and Gu, (2007).

3.3. Hypothesis 9. The hypothesis nine states conservatism strengthen the value relevance of the other comprehensive income (Cn*DAKOT). The result of statistical test shows that t is 5.984, the probability is 0.000 and the coefficient is

positive, then Ho 9 successfully rejected. In this study, OCI is quoted from the book positive, then Ho 9 successfully rejected. In this study, OCI is quoted from the book

3.4. Hypothesis 10. The hypothesis ten states conservatism weaken the value relevance of corporate resource in the form of current operating asset (Cn*ALOPS). Statistical test result shows the value of t is -1.735 and a probability is 0.083, significant at 10 percent and the coefficient is negative. Therefore Ho 10

successfully rejected at moderate level. Growth in current operating asset is responded by investors as the accretion of less productive asset (Ou, 1990; Seng and Hancock, 2012).

3.5. Hypothesis 11. The hypothesis eleven states conservatism weaken the relevance of corporate resources in the form of fixed asset growth (Cn*INV). Statistical test result shows t is -1.825 and probability is 0.068. This result indicates that Cn*INV significant at moderate levels (10 percent) and the coefficient is

negative, therefore Ho 11 successfully rejected. In a conservative condition, the growth of fixed asset shows a downward bias. Investors responded negatively on the growth of fixed asset (Lev and Zarowin, 1999; Gu (2007).

3.6. Hypothesis 12. The hypothesis twelve states conservatism weaken the value relevance of corporate resource in the form of intangible asset (Cn*DATW). Statistical test result shows the value of t is -3.093, the probability is 0.002 and the

coefficient is negative, so that Ho 12 successfully rejected. In a conservative condition, intangible asset is reported less than its economic value. The investor responses negatively to intangible asset (Watts, 2003a).