Corporate Governance And Accounting Conservatism

Accounting conservatism is regarded as an important tradition in financial accountingand the most influential measurement in accounting theory, reducing the information asymmetry between client and trusteeand improving the contract efficient and lessening the agency costs. Corporate governance is a series mechanisms in place to ensure that the assets of the firm are used efficiently, guaranteeing the suppliers of finance a return on their investment, must restrict the actions which the assets owned stockholders are inappropriate assigned to management. In order to supervise the management, effective governance mechanism induces using conservative accounting policies because they can provide early warning signals to governance bodies such as the board of directors, promoting early investigation into the reasons for bad news.Domestic papers only studies the relations between the aspect of corporate governance and accounting conservatism, including the board of directors, ownership structure and CPA audit. We think corporate governance which is regarded as institutional arrangement relieving the agency costs covers the wide area from macroscopical legal system and competition to microscopical senior managers'compensation. We want to consider from governance environment and mechanism for studying the relations between corporate governance and accounting conservatism comprehensively. Corporate governance environment is at least including property protection, legal level, competition, credit system and contract culture(Xia lijun et al,2005). Corporate governance mechanisms are divided into interior and exterior mechanisms, interior mechanisms are including ownership structure, board of director, senior managers'compensation and ownership, exterior mechanisms are including CPA audit and the governance effect of debt. We try to study the relations between corporate governance and accounging conservatism deeply, for example the political relation owned by corporate, the background of independent director. In addition domestic papers study the relations in statics, in fact some governance mechanisms change over time, for example corporate can change accounting office by all kinds of reasons, so different accounting office can bring different effect to accounting conservatism. So we consider the relations in dynamics for the change of governance mechanisms. From the research perspective, the dissertation has been divided into nine chapters as follows:Chapter 1 Introduction. In the introduction, we present the research motive, research methodology and significance, research framework.Chapter 2 Literature Review. In this chapter, we analyse the emergence and development of accounting conservatism and corporate governance on the basis of literature review, clarify the relations between corporate governance and accounting conservatism. We find the defects of former research by reviewing literature and locate the research direction and perspective.Chapter 3 Theoretical analysis. In this chapter, we card the theory of accounting conservatism and corporate governance, use contract theory and neuroeconomics studies to explain accounting conservatism. We analysis the feature of our listed companies and influence to accounting conservatism, lay the foundation for the latter empirical research.Chapter 4 Corporate Governance Environment and Accounting Conservatism. In this chapter, using the marketization index, the relation index of government and market, legal regime environment index designed by Fan Gang et al(2010) decribing the marketization process, government intervention and legal level of different provinces, we test the effect of corporate governance to accounting conservatism.Chapter 5 Equity, Ownership structure and Accounting Conservatism. For equity, we test the effect of listed state-owned enterprises interfered by different government to accounting conservatism, the effect of non-state-owned enterprises'political connection to accounting conservatism. For ownership structure, except for testing the effect of controlling shareholder and closely held ownership structure to accounting conservatism, we test the effect of institutional investors to accounting conservatism because institutional investors have developped rapidly and become the important part of security market which can influence the listed enterprises.Chapter 6 The Independence of the Board of Directors, Management Ownership and Accounting Conservatism. In this chapter, except for testing the effect of proportion of independent directors and separation of chairman CEO duality to accounting conservatism, we test the effect of the background of independent directors to accounting conservatism from deep level, this is an unique field which available literatures don't mention. We think management ownership in the structure of one big share is different with that in the structure of decentralization of shares, so we test the effect of management ownership to accounting conservatism in the structure of one big share.Chapter 7 CPA Audit and Accounting Conservatism. In this chapter, we have divided accounting firms into three parts:international big 4, national top 10 and national minor firms, test the effect of different accounting firms to accounting conservatism, this is in statics. We study the effect of different accounting firms to accounting conservatism in dynamics from two ways, one is the change of accounting firms, the other is the merger of accounting firms.Chapter 8 Debt and Accounting Conservatism. In this chapter, we test the effect of debt ratio and debt maturities to accounting conservatism of different enterprises and adopt factor analysis to test the comprehensive effects of corporate governance on accounting conservatism.Chapter 9 Conclusion. The chapter generalizes the basic conclusions, puts forword some suggestion of improving accounting conservatism, research innovation, the limitations of the study and the further research directions.So we study the relations between corporate governance and accounting conservatism from governance environment and interior and exterior mechanisms, enrich the papers of corporate governance and accounting conservatism. We study the relations between corporate governance and accounging conservatism deeply from the political relation owned by corporate and the background of independent director. We study the relations in dynamics by considering the different effect which different accounting firms(including before and after the merger of accounting firms and the change of accounting firms) bring to accounting conservatism.