Study On Managerial Entrenchment,Accounting Conservatism And Cost Of Equity Capital

Modern enterprise separation of two rights governance characteristics gives prominence to the important position of enterprise managers in decision-making, but under the asymmetric information and incomplete contract, between self interested managers and shareholders of target inconsistent, lead managers stick to position and maximize their own utility managerial entrenchment behavior, thereby affecting the enterprise accounting conservatism and the cost of equity capital. Based on the current Chinese listed companies major shareholders control and internal control dual control coexist, the enterprise accounting conservatism level low and equity capital cost high realistic background, of managerial entrenchment, accounting conservatism and the cost of equity capital.Firstly from the economic man hypothesis, asymmetric information theory, control right theory and behavioral consistency hypothesis refine managerial entrenchment theory foundation, in the overall managerial entrenchment, accounting conservatism and the cost of equity capital research lay theoretical basis. On the basis of this and never fully contract theory, signal transmission theory, investor risk theory and capital market information transmission rules theory predicts, the system refines the managerial entrenchment and accounting conservatism theoretical basis, accounting conservatism and the cost of equity capital theoretical basis. Finally, based on the theoretical basis, the theoretical analysis framework of the relationship between managerial entrenchment, accounting conservatism and equity capital cost is put forward. The use of multiple linear regression, principal component analysis method, mediating effect test method and structural equation method investigate the regularity of the following aspects: Managerial Entrenchment degree variables(including management ’personal characteristics, managers incentive characteristics, managers by feature constraint) and corporate accounting conservatism between relationship rules and managerial entrenchment and listed company cost of equity capital of relation law, accounting conservatism rules impact on the cost of equity capital and managerial entrenchment by conduction rule of accounting conservatism affect the cost of equity capital. It is found that:(1) Managerial entrenchment influence accounting conservatism, the higher the degree of managerial entrenchment, the lower the accounting conservatism.(2) Managerial entrenchment influence cost of managerial entrenchment, the higher the degree of managerial entrenchment, the higher the cost of equity capital.(3) Accounting conservatism affects the cost of equity capital, the higher the accounting conservatism, the lower the cost of equity capital.(4) In the overall sample and in the state of the sample, the management of defense through the accounting conservatism of the impact of equity capital costs hypothesis. The finally cancel the executives of state-owned enterprises administrative appointment system, perfect professional manager market, perfect management internal constraint mechanism, the accounting conservatism into the investor protection evaluation system.This papers based on Chinese special system background, certain extent expands the defensive management theory, and enrich the equity capital cost measurement model theory, expand the analysis framework of research on cost of equity capital, provides an analytic approach for the research on the issues related to the cost of equity capital conduction. It provides the basis for selecting top executives of listing Corporation, improving the financial management system of the company and reducing the cost of the company’s financing.