This study investigates the effects of investor sentiment, audit tenure, and auditor rotation on accounting conservatism in non-financial firms listed on the Indonesia Stock Exchange during 2001–2024. Unlike prior studies that rely on a single proxy, this research treats conservatism as a multidimensional construct. Khan and Watts’ C-score is used as the primary measure of firm-year conditional conservatism, while Basu’s asymmetric timeliness model and the Givoly–Hayn accrual-based measure are employed as robustness tests. The analysis uses panel regressions with two-way clustered standard errors by firm and fiscal year, following Petersen (Citation2009), while controlling for firm-specific and audit-related characteristics. The findings show that the effects of the explanatory variables depend on the conservatism measure used. In the C-Score model, investor sentiment is only weakly positively associated with conservatism, whereas audit tenure and auditor rotation do not exhibit robust direct effects. In the Basu specification, audit tenure is positively associated with the timely recognition of bad news, suggesting that longer auditor-client relationships may strengthen conditional conservatism through learning and client-specific expertise. In the accrual-based specification, investor sentiment is negatively associated with conservatism, while auditor rotation is positively associated with conservatism, indicating that optimistic market conditions may reduce accrual-based prudence, whereas auditor change may introduce a fresh-look effect in accrual judgments. Overall, the study shows that the determinants of accounting conservatism are proxy-specific and that prior mixed evidence may partly reflect differences in measurement.
Ratnadi et al. (Sat,) studied this question.