Government Intervention,Institutional Environment And Accounting Conservatism

Starting from such economic proposition that Government intervention, especially government controlling of enterprises, is a second-best institutional arrangement suitable of economic environment based on weak fundamental institutions, this dissertation discusses the influence of government intervention on the quality of accounting measured as accounting conservatism.As compared to non-government controlled listed companies, listed companies controlled by government have less incentives to provide high quality accounting information, such as conservatism accounting, because the latter are inclined to pursue non-economic efficiency goal, and face dilemma of soft budget constraints and transferability of state-owned shares. Based on data from non-financial listed companies during 2001 and 2005, this dissertation finds: (1) listed companies controlled by government have less accounting conservatism than non-government controlled listed companies; (2) the more local government intervenes the local market, the less conservative accounting the listed companies in this area have, but government controlled listed companies have no significant difference in accounting conservatism; (3)such finding as (1)is more significant, as local government intervenes the local market on less degree.Within government controlled listed companies, as government keep less control on state-owned listed companies, insiders have more incentives to pursue economic efficiency and then have less incentives to distort accounting information. On the other hand, insiders control dilemma appears because of weak corporation governance mechanism, which leads to more incentives to accounting distortion for insiders. Empirical evidence shows that insiders control dominates, as government keeps less control, which leads to less accounting conservatism.This dissertation is organized as follows:Chapter 1 briefly introduces the research background and main issues, as well as contributions of this dissertation;Chapter 2 discusses the demands and supplies of high quality accounting information in perfect market environment and the incentives behind these demands and supplies, as well as the investor protection effect of high quality accounting information. Such discussion helps to provide a benchmark to study demands and supplies of accounting information in imperfect market;Chapter 3 tests the differences of accounting conservatism between government controlled listed companies and non-government controlled listed companies, as well as differences of accounting conservatism between listed companies in different regions, as well as government controlled listed companies in different regions and non-government controlled listed companies in different regions.Chapter 4 discusses whether there lies different accounting conservatism among government controlled listed companies with different controlling shareholder identities or among those with different controlling chains.Chapter 5 sums up the main conclusions in this dissertation and the main limitations and the potential research topics are also discussed.The appendix surveys the history of marketization process and stock market developments in china. According to the survey, we can learn about the contributions and limitations of government intervention.