The relationship between official authority and conservatism in the prediction of benefits by the manager

This study examined the relationship between corporate governance and conservatism in profit forecasting. Corporate governance plays an important role in applying conservatism in profit forecasting. Evidence implies that in many cases the managers affect the reported profit to maximize their benefits. Conservatism is a limitation to decrease opportunistic desire and behavior in managers and reduce agency costs in institutions and companies. On the other hand, corporate governance by its mechanisms can reduce the power of managers to pursue their own interests and so the company's enterprise value is distributed appropriately among all stakeholders. The used components as independent variables for corporate governance were institutional ownership, ownership concentration, and independence of managers. After identifying the target population, 71 Companies were selected using Cochran formula as the sample size for the period 2007 to 2012 using random sampling. To test the research hypotheses multiple linear regression model is used by combined data method. After required analyzing by the software Eviews7, these results were obtained: managers’ independence variable has significant relation with conservatism in profit forecasting. However, there was no relation between institutional ownership and ownership concentration with conservatism in profit forecasting.