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Exploring the Impact of Accounting Prudence: The Role of Firm Size as a Moderating Factor

Rico Wijaya, Enggar Diah Puspa Arum, Ilham Wahyudi, Rani Amalia

Abstract

This study aims to examine the influence of information asymmetry, tax incentives, and litigation risk on accounting prudence, with firm size as a moderating variable. The research focuses on companies listed on the Jakarta Islamic Index (JII) during the 2020-2023 period. Accounting prudence is measured to understand how companies apply caution principles in financial reporting. The results of this study indicate that information asymmetry is not related to accounting prudence, tax incentives have a significant influence on accounting prudence, litigation risk affects accounting prudence, firm size does not moderate the relationship between information asymmetry and accounting prudence, and firm size does not moderate the relationship between tax incentives and accounting prudence. However, firm size strengthens the relationship between litigation risk and accounting prudence. The novelty of this research lies in the integration of firm size as a moderating variable in the relationship between litigation risk and accounting prudence, which has not been widely explored in the context of sharia-based companies in Indonesia. In addition, this study provides empirical insights into the application of accounting prudence in situations influenced by fiscal policies and potential legal risks. Future researchers are advised to expand the research scope by considering other variables, such as corporate social responsibility (CSR) or macroeconomic factors that may influence accounting prudence. Longitudinal research covering a more extended period is also expected to yield more comprehensive and robust results.

Keywords

Information Asymmetry; Tax Incentives; Litigation Risk; Accounting Prudence; Firm Size.

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DOI: 10.21043/equilibrium.v12i2.28713