Prediction of Financial Distress in the Pandemic Period with Accounting Conservatism as a Mediation Variable

Abstract

The aim of this study is to examine the role of accounting conservatism in mediating the effect of firm size, leverage, profitability and the board of directors on financial distress. The population of this research was a manufacturing company listed on the Indonesia Stock Exchange (IDX) in 2018-2020. The research sample was determined through purposive sampling method. The data used was secondary data from annual reports of each company. The data analysis tool used descriptive analysis and path analysis. The results of the study showed that firm size, profitability, and accounting conservatism had a significant positive effect on financial distress directly, while leverage and the board of directors had a negative effect on financial distress. Accounting conservatism in this study was able to mediate the effect of firm size and profitability on financial distress, but was unable to mediate the effect of leverage and the board of directors on financial distress. Suggestions for management are to maintain the quality of company management, especially in terms of finance to prevent financial distress, as well as apply accounting conservatism in the company's financial report, so that the information presented in the financial statements can be used as a relevant basis for decision making and provide signals for management to be more responsive and careful in managing finances to overcome losses that may occur in the future.