Accounting Conservatism in the COVID-19 Period: Evidence from Indonesia’s Conventional Commercial Banks

Atik - Isniawati (Universitas Darma Persada)
Rahmawati - Rahmawati (Universitas Sebelas Maret)
Ari Kuncara Widagdo (Universitas Sebelas Maret)
Agung Nur Probohudono (Universitas Sebelas Maret)
Jombrik - Jombrik (Universitas Darma Persada)

AFRE Accounting Financial Review
Vol. 7 No. 1 (2024): March 2024

This study assesses the level of accounting conservatism in terms of the timeliness of loan loss provisions (LLP). We use a sample of Indonesia's conventional commercial banks over 2018Q1–2021Q4. The total sample was 1270 observations over 16 quarters. This study focuses on the impact of the implementation of credit restructuring policies during the COVID-19 pandemic on accounting conservatism in terms of the timeliness of LLP. Our findings of conventional commercial banks are not conservative, meaning that there is a delay in recognition of LLP, as evidenced by the positive and significant influence of ΔNPLt-1 and ΔNPLt on LLP. However, the effect of ΔNPLt+1 on LLP is negative and significant. This result is thought to have happened because, in 2018, banks had begun to change their behaviour towards counter-cycles in accordance with PSAK71. However, the change was disrupted due to the issuance of credit restructuring policies during the COVID-19 pandemic. This study is expected to provide information regarding the effects of credit restructuring policies during the COVID-19 pandemic on banks' conservative behavior.DOI: https://doi.org/10.26905/afr.v7i1.12254